Oil climbs over $5 a barrel as shock from surprise OPEC+ production cut

Brent crude rose to the highest level in nearly a month at the open, trading up $5.67, or 7.1%, at $85.56 a barrel by 2249 GMT.

US West Texas Intermediate crude touched its highest level since late January and was up $5.41, or 7.2%, at $81.08 a barrel.

Read also: OPEC+ cuts oil production by more than 1 million barrels – here’s a detailed list

The Organization of the Petroleum Exporting Countries and its allies including Russia spooked markets on Sunday by announcing production cuts of about 1.16 million barrels per day. The group known as OPEC+ was expected to maintain its earlier decision to cut production by 2 million bpd until December.

The total amount of cuts by OPEC+ is 3.66 million bpd, equivalent to 3.7% of global demand, according to Reuters calculations.

As a result, Goldman Sachs cut its end-2023 production forecast for OPEC+ by 1.1 million bpd and raised its Brent price forecast to $95 and $100 a barrel in 2023 and 2024, respectively, its analysts said in a note. Said.

Read also: Nearly a dozen countries have announced oil production cuts through May – from Saudi Arabia to Iran

“Today’s surprise cut is in line with the new OPEC+ principle that they can act in a pre-emptive manner without significant loss of market share,” the bank said.

“Unsurprisingly, this cut reflects important economic and potentially political considerations.”

Goldman estimated that the production reduction could provide a 7% boost to oil prices, contributing to higher Saudi and OPEC+ oil revenues.

The Biden administration said it viewed the move announced by the producers as unwise.

The text of this story is published from a wire agency feed without any modification.