Surprise new cuts to the OPEC+ group’s output targets could push oil prices towards $100 a barrel, setting the scene for another clash with the West grappling with higher interest rates, analysts and traders said on Monday.
The decision signals unity within OPEC+ despite Washington’s pressure on its Gulf allies to weaken their ties with Moscow, while also undermining the West’s efforts to limit Russia’s oil income.
Oil prices jumped over 6% on Monday after the OPEC+ announced on Sunday further production target cuts of about 1.16 million barrels per day (bpd) from May through the rest of the year.
The pledges will bring the total volume of cuts by the group known as OPEC+ since November to 3.66 million bpd equal to 3.7% of global demand.
Saudi Arabia said its voluntary output cut was a precautionary measure aimed at supporting market stability.
The IEA said the cuts risk exacerbating a strained market and pushing up oil prices amid inflationary pressures.
“The new cuts are underpinning that the OPEC+ group is intact and that Russia is still an integral and important part of the group,” said Bjarne Schieldrop, analyst at SEB.
Published in The Express Tribune, April 4th, 2023.
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