Oil prices surge after OPEC’s surprise cuts, analysts warn of $100 per barrel

After OPEC+ announced a production cut of 1.16 million barrels per day, oil prices surged 8% at the start of trading.

Brent crude futures surged 5.07% to $83.95 a barrel at the end of the news, while US West Texas Midterm crude futures surged 5.17% to $79.59 a barrel.

SAUDI ARABIA announced that voluntary cuts would start from May to the end of 2023, saying it was a “precautionary measure” aimed at stabilizing oil markets.

The move builds on Russia’s decision to cut oil production by 500,000 barrels per day by the end of 2023, according to Russian Deputy Prime Minister Alexander Novak.

Other member states have also pledged their own cuts, with OPEC Kingpin Saudi Arabia making cuts of 500,000 barrels per day and the UAE cutting 144,000 barrels per day, with Kuwait, Oman, Iraq, Algeria and Kazakhstan among others. are doing

CMC Markets analyst Tina Teng told CNBC: “OPEC+’s plan to cut further production will push oil prices back into the $100s, given China’s reopening of the economy and Russia’s production cuts as retaliation for Western sanctions. It can be pushed up,” he said.

But Teng said a rate cut could reverse a fall in inflation, “complicating the central bank’s rate decisions.”

Last October, the oil cartel announced a decision to cut production by 2 million barrels per day. The White House said at the time that it was “disappointed by the short-sighted decision by OPEC+” to cut production quotas by President Joe Biden while the world was still grappling with the war in Ukraine.

“But unlike [the cut in October]global oil demand momentum is rising, not weakening, due to China’s strong recovery,” Goldman Sachs said in a report.

That could lift Goldman’s Brent forecast by $5 a barrel to $95 a barrel in December 2023, the investment bank said in a report after an unexpected overnight decision. rice field.

Analysts led by Goldman Sachs’ Daan Struyven said the surprise cut was “in line” with OPEC+ principles and acted preemptively.

Oil prices fell to their lowest since December 2021 in March. This is because traders feared that a bank crash could have a negative impact on global economic growth.

Oil cartels and their allies are trying to avoid a repeat of the 2008 crash, one analyst said.

“They’re looking at the second half of the year, and they’re looking at a repeat of 2008,” said Bob McNally, president of Rapidan Energy Group, citing oil prices plummeting from $140 to $35 in half the year. I have decided that I don’t want to.

McNally added that although that’s not his base case scenario, oil prices “could spike by $100 … if Chinese demand returns to 16 million barrels a day later this year.” [and] If Russian supplies start to cut off because of sanctions or something.”