Oil prices rose as much as 8% at the open after OPEC+ declared a 1.16 million barrel per day cut in production. On the basis of this information, both Brent and U.S. West Texas Intermediate oil futures recently increased by 5.07% and 5.17%, respectively, to $83.95 and $79.59 a barrel.
According to Saudi Arabia, the voluntary cuts will begin in May and last until the end of 2023. They were described as a “precautionary measure” meant to stabilize the energy market.
The decision to reduce oil output by 500,000 barrels per day through the end of 2023 prompted the action, Russia’s Deputy Prime Minister Alexander Novak.
Additional member states have committed to lowering their production in addition to Saudi Arabia, which will cut its output by 500,000 barrels per day. The UAE will reduce its output by 144,000 barrels per day, and Kuwait, Oman, Iraq, Algeria, and Kazakhstan will also do so.
“Considering China’s reopening and Russia’s output cuts as a retaliation move against western sanctions, OPEC+’s plan for a further production cut may push oil prices toward the $100 mark again,” CMC Markets expert Tina Teng.
However, as Teng pointed out, the reduction could also make the inflation rate rise, which would “complicate central banks’ rate decisions.”
Oil prices fell to their lowest point in March since December 2021 as traders worried that the financial crisis might slow down world economic expansion.
According to Wood Mackenzie, 40% of the global oil demand recovery would come from China.market rebound in 2023.
The energy cartel made the choice to reduce production by two million barrels per day public in October. United States President Joe Biden was “disappointed by the shortsighted decision by OPEC+” to reduce output limits at the time, according to the White House, which also noted that the world was still dealing with the conflict in Ukraine.