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Wednesday May 22, 2024

Oil prices soar almost 6% after OPEC+ output cut

OPEC oil cuts will fan fresh fears of inflation and put more pressure on central banks to hike interest further

By AFP
April 03, 2023
This picture shows oil pumpjacks along a section of Highway 33 known as the Petroleum Highway north of McKittrick in Kern County, California. — AFP/File
This picture shows oil pumpjacks along a section of Highway 33 known as the Petroleum Highway north of McKittrick in Kern County, California. — AFP/File

HONG KONG: Oil prices soared almost 6% in Asian trade Monday morning after major producers led by Saudi Arabia announced a surprise cut of more than one million barrels per day (bpd).

The West Texas Intermediate contract jumped 5.74% to $80.01 a barrel, while Brent jumped 5.67% to $84.42.

The move by Saudi Arabia, Iraq, UAE, Kuwait, Algeria and Oman will be in effect from next month until the end of the year, and marks the biggest OPEC oil cut since the cartel slashed two million bpd in October.

The reduction came on top of a Russian decision to extend a cut of 500,000 barrels per day, and in spite of US calls to increase production.

The oil production cuts will fan fresh fears about inflation and put more pressure on central banks to hike interest rates further.

Market "sentiment is likely to take a knock... as higher levels of expected inflation assumes higher [for longer] interest rates", said Matt Simpson at City Index.

"And stocks likely won't appreciate this development, so we could be in for a rocky start to the week."