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Hong Kong/Atlanta
CNN
—
Oil prices surged during Asian trade on Monday after OPEC+ producers announced production cuts in an unexpected move.
Global benchmark Brent crude rose 4.8% to $83.73 a barrel, while US benchmark WTI rose 4.9% to $79.36.
Rising oil prices could mean a prolonged period of inflation, putting pressure on key issues for consumers around the world.
On Sunday, Saudi Arabia, along with other members or allies of the Organization of the Petroleum Exporting Countries (OPEC), announced it would begin a “voluntary cut” in crude oil production.
The cuts will begin in May and continue until the end of the year, Saudi state news agency SPA said, quoting an official from the Saudi Ministry of Energy.
The SPA said the cuts were higher than those announced by OPEC+ in October.
That month, oil producers agreed to cut production by 2 million barrels per day. This is the largest cut since the start of the pandemic and is equivalent to about 2% of global oil demand.
Saudi Arabia now says it will cut oil production by another 500,000 barrels per day.
Meanwhile, Iraq will cut production by 200,000 barrels per day and the United Arab Emirates by 144,000 barrels per day.
Kuwait, Algeria and Oman will also cut production by 128,000, 48,000 and 40,000 barrels per day respectively.
In a note on Sunday, Goldman Sachs analysts said the move was unexpected but “consistent with the new OPEC+ policy of acting preemptively because it can act without significantly losing market share. There are,” he said.
The total cut in output by the nine OPEC+ countries is 1.66 million barrels per day, analysts said, raising Brent price forecasts to $95 a barrel this year.
Saudi Arabia’s energy ministry described the recent cuts as a precautionary measure aimed at helping stabilize the oil market, according to the SPA.
The White House opposed the idea, as did the latest cuts by OPEC+.
A spokesman for the National Security Council said: “Given market uncertainty, we do not believe any cuts are desirable at this time. We have made that clear.” “We are looking at prices for American consumers, not barrels.”
In October, the OPEC+ production cut decision had already angered the White House.
US President Joe Biden promised at the time that Saudi Arabia would suffer “consequences.” But so far his administration appears to have backed off on its vows to punish the Middle Eastern kingdoms.
Russia, an OPEC Plus member, also said on Sunday that it would extend voluntary cuts of 500,000 barrels a day until the end of 2023. The move was announced by Russian Deputy Prime Minister Alexander Novak, as quoted by state news agency TASS.
The decision wasn’t all that surprising. Analysts at Goldman Sachs said they had expected rate cuts to continue into the second half of the year.
— CNN’s Hanna Ziady and Arlette Saenz contributed to this report.
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