Early Asian trading on Monday saw a sharp increase in oil prices after OPEC+ unexpectedly reduced production further to calm markets shaken by concerns over economic growth & a possible banking crisis.
The Organization of the Petroleum Exporting Countries & allies, or OPEC+, defied earlier predictions that the cartel would keep output by announcing on Sunday that it would reduce produce by about 1.16 million barrels every day (bpd).
The reduction brings the overall production cuts by cartel members to 3.66 million bpd. This figure includes a 2 million bpd reduction by OPEC in October and a 500,000 bpd reduction pledged by Russia.
At 500,000 bpd, Saudi Arabia, the OPEC leader, contributes the most to the most recent reduction.
Iraq and the United Arab Emirates each contribute 144,000 bpd and 211,000 bpd, respectively.
The unexpected move, which was announced on Sunday, comes before a fictitious meeting of the OPEC’s Combined Ministerial Monitoring Committee on Monday, which media reports had indicated was likely to result of production being maintained at a steady level.
However, the OPEC’s actions come as oil prices plunged to fifteen month lows in Mar as a result of worries about sluggish growth in the economy and weakening crude demand stoked by the failure of several U.S. institutions.
Following the crash, some of the OPEC members had promised to intervene and “stabilize” the crude market.
Following the OPEC+ cut, the investment company Goldman Sachs increased its Brent price estimates by $5 to $95 per barrel by December 2023.
The Biden Administration stated that it is going to keep to work towards lowering gas costs for consumers and that the OPEC production cuts were not prudent. For this purpose, the White House distributed through 2022 over one hundred million barrels of crude oil from the Strategic Fuel Reserve.