OPEC+ surprise output cuts lift oil prices by $5/bbl

The sudden declaration by OPEC+ to further reduce output in what top producer Saudi Arabia called a precautionary move to protect market stability sent oil prices soaring on Monday.

Brent oil reached its highest price in a month at $86.44 earlier in the day. At 03:47 GMT, it was trading at $84.26 a barrel, up $4.37 or 5.5%.

U.S. West Texas Intermediate oil had earlier reached its highest level since late January and was now trading at $79.90 a barrel, up $4.23 or 5.6%.

By announcing production cutbacks of around 1.16 million barrels per day on Sunday, the Organization of the Petroleum Exporting Countries and their allies, including Russia, shocked the markets.

The group known as OPEC+ had been expected to maintain its earlier decision to cut output by 2 million bpd until December at its monthly meeting on Monday.

The pledges bring the total volume of cuts by OPEC+ to 3.66 million bpd according to Reuters calculations, equal to 3.7% of global demand.

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

Despite decreased OPEC oil supply in March owing to oilfield maintenance in Angola and a stop in part of Iraq’s shipments, Brent slid last month near $70 a barrel, the lowest in 15 months, on worries that a worldwide financial crisis and increasing interest rates would hurt demand.