Oil Prices Hike Over OPEC+ Decision to Slash Production

Oil Prices Hike Over OPEC+ Decision to Slash Production

/ Financial News / Monday, 03 April 2023 07:04

Oil prices increased after OPEC+ announced an unexpected production cut of more than a million barrels, while equities mostly rose after data showed US and European inflation eased further last month.

The OPEC+ group’s decision has led to concerns about a fresh spike in prices that could put pressure on central banks to push interest rates higher.

Both Brent and WTI crude contracts jumped almost six percent at one point following the voluntary cut by Saudi Arabia (500,000), Iraq  (211,000), UAE (144,000), Kuwait (128,000), Kazakhstan (78,000), Algeria (48,000) and Oman (40,000), which was the biggest since the group slashed two million barrels per day in October.

The cuts come on top of Russia’s decision to extend a cut of 500,000 barrels per day and in spite of US calls to increase production.

At the time of this writing, WTI crude hovered at $79.37 per barrel, while Brent crude was at $83.74.

A Saudi Energy Ministry official "emphasized that this is a precautionary measure aimed at supporting the stability of the oil market," according to the official Saudi Press Agency.

Crude prices have come down over the past year as concerns about a possible recession caused by higher borrowing costs have offset supply worries sparked by sanctions on Russia over its invasion of Ukraine.

Analysts have maintained that the decision could deal a blow to markets, which had rallied in recent weeks on optimism that the recent banking sector turmoil could force the US Federal Reserve to end its rate hike drive sooner than expected.

"The OPEC+ production cut is another reminder that the inflation genie is not back in the bottle," noted one analyst.

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