Oil Prices Soar after OPEC+ Agree to Cut Production

Jakarta, CNN Indonesia —

World crude oil prices soared around US$5 per barrel at the opening Monday (3/4) morning. The jump came after a surprise announcement by the Organization of the Crude Oil Exporting Countries and its allies (OPEC+) that it would cut production by around 1.16 million.

Reported by Reuters, the price of Brent crude rose US $ 5.06, or 6.3 percent to its highest level in almost a month at the open, US $ 84.95 per barrel.

Strengthening also occurred in the price of US West Texas Intermediate (WTI) crude oil of US $ 4.8 to 6.3 percent to its highest level since the end of January US $ 80.47 per barrel.



Yesterday, OPEC+ rocked the market by announcing production cuts of around 1.16 million bpd from April to the end of the year.

The oil producer group is also expected to maintain its previous decision to cut production by 2 million barrels per day through December at its monthly meeting earlier this week.

The commitments bring the total volume of cuts by OPEC+ to 3.66 million bpd according to Reuters calculations, equivalent to 3.7 percent of global demand.

The decision led Goldman Sachs to lower its final 2023 production forecast for OPEC+ by 1.1 million bpd and raise its Brent price forecast to $95 and $100 per barrel in 2023 and 2024 respectively.

“Today’s surprise cut is consistent with OPEC+’s new doctrine of acting first because they can do so without losing significant market share,” Goldman Sachs said.

Goldman estimates the production cuts could provide a 7 percent boost to oil prices. In addition, it will also boost Saudi and OPEC+ oil revenues.

The Biden administration considers the move announced by OPEC+ to be unwise.

Last month, Brent fell to US$70 a barrel, its lowest in 15 months, on fears the global banking crisis and rising interest rates will hit demand.

“Today’s move, like the October cut, can be read as yet another clear signal that Saudi Arabia and its OPEC partners will seek to mitigate further macro selloffs and that Jay (Jerome) Powell is not the only central bank that matters,” said RBC analysts. Capital, Helima Croft.

According to Croft, Washington and Riyadh simply have different price targets for their major policy initiatives.”

National Australia Bank analysts say OPEC+ production cuts and recovering demand from major crude importer China could push oil prices above $100 per barrel into the third quarter.

Meanwhile, the Energy Information Administration (EIA) noted that US crude oil production rose in January to 12.46 million bpd, the highest since March 2020.

(Gambas:Video CNN)


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