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Oil prices jump nearly $5 on surprise OPEC+ output cut

Published 04/02/2023, 07:58 PM
Updated 04/02/2023, 08:05 PM
© Reuters

By Ambar Warrick -- Oil prices shot up in early Asian trade on Monday after the OPEC+ unexpectedly cut production further to stabilize markets hit by fears of slowing economic growth and a potential banking crisis.

Brent oil futures jumped 6.2% or $5 to $84.19 a barrel, their strongest level in nearly a month, while West Texas Intermediate crude futures rose 6.3% or $4.8 to $80.45 a barrel, and were trading close to levels seen in late-January by 20:01 ET (00:01 GMT). Both contracts have now reversed the steep losses seen through March. 

The Organization of Petroleum Exporting Countries and allies, known as OPEC+, said on Sunday it will cut production by about 1.16 million barrels per day (bpd), ducking prior expectations that the cartel will maintain output.

The cut now brings total production cuts by members of the cartel to 3.66 million bpd, which includes a 2 million bpd cut by the OPEC in October, as well as a 500,000 bpd cut promised by Russia. 

Saudi Arabia, which leads OPEC, accounts for the largest portion of the latest cut, at 500,000 bpd, followed by a 211,000 bpd cut by Iraq and a 144,000 bpd cut by the United Arab Emirates.

The move, which was unexpectedly announced on Sunday, comes ahead of a virtual meeting of the Joint Ministerial Monitoring Committee of the OPEC on Monday, which media reports had suggested was likely to result in production being kept steady.

Still, the OPEC’s moves come as oil prices crashed to 15-month lows in March after the collapse of several U.S. banks drummed up concerns over slowing economic growth and weakening crude demand.

Some OPEC members had vowed to intervene and “stabilize” crude markets in the wake of the crash. 

Investment bank Goldman Sachs hiked its price forecasts for Brent by $5 to $95 a barrel by December 2023, following the OPEC+ cut.

The Biden Administration said that the OPEC cuts were not advisable, and that it will continue to target bringing down gasoline prices for consumers. The White House had released over 100 million barrels of crude from the Strategic Petroleum Reserve through 2022 to this end.

Latest comments

They can cut all they want. It won't stop the collapse of oil as this economic tsunami rolls in. Depression is now inevitable.
based on what exactly?
The greatest case for lessening our dependance on our - is always made by the oil producing countries.
I think OPEC+'s production cuts are simply due to a drop in demand. No one wants to turn down their customers.
Inflation everywhere. Thank you Saudi
Inflation to USD....Hi Honey I'm home!!!
OPEC just spit in Biden's face.  The entire world has no respect for Biden.
Yep old poopy joe just got owned.
tom, why would OPEC care about the plight of any POTUS?
 Damn, you really are dumb.  OPEC has always had a relationship with POTUS.  They listened to Trump but they tell Biden to go pound sand.
We need to withdraw our support for Saudi Arabia.
I don't think they'd mind - they're already cosying up to China in return for OPEC guaranteeing long term oil supply for China for WW3.
along with Brazil, Saudi Arabia have it in for the petrodollar by announcing that they will trade in commoditieis including oil, with China in Yuan - and not in USD - concerted attack by OPEC plus and the BRICS nations to turn their back on the USD as it has been weaponised over the past few years and it's just getting crazy, the amount of new stuff they're printing.
it will not impact much too market or inflation. it just minor. dow will go 35000 by month end
Arabians need some spring awakenings
Persians too.
We should be energy independent. Instead we depend on OPEC. Thanks Joe!!
"Some OPEC members had vowed to intervene and 'stabilize' crude markets in the wake of the crash" ... same old B.S. each time price comes down; the production will always end up higher than pledged. It's simple: No producer will turn away a buyer who wants more oil because the buyer will simply go to another source. The last time OPEC practiced any real discipline of its volition was during the height of the pandemic because there was no demand then anyway. Underinvestment in oilfields since have naturally reduced output. Since then, almost every producer has been maxing out while publicly proclaiming adherence to the 2 mln bpd cut BS announced in October. Just go back and check the output in recent months to verify  This so-called cut is likely to end up the same. What OPEC is doing is using the power of the megaphone: Announce a cut, get the price impact, then produce what it really wants.
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