Oil prices jumped following OPEC kingpin Saudi Arabia’s decision to cut production by another million barrels per day.
On Sunday, the Organization of the Petroleum Exporting Countries and its partners (known as OPEC+) made no changes to its planned oil production cuts for the rest of the year.
However, the world’s top oil exporter Saudi Arabia announced further voluntary output cuts which will be implemented from July.
The kingdom’s output will decline to 9 million barrels per day from around 10 million barrels in May, Saudi’s energy ministry said in a statement.
Global benchmark Brent futures were up 2.4% at $78.00 a barrel Monday during early Asia trade, while U.S. West Texas Intermediate futures rose 2.5% to $73.53 per barrel.
OPEC+ pumps approximately 40% of the world’s crude and production decisions can have a significant impact on prices.
On April 3, several producers of the oil cartel had revealed a combined 1.66 million barrels per day of production declines until the end of this year. And many market watchers, including analysts at Goldman Sachs, had expected the alliance to keep output unchanged this time around.
“The market did not widely expect the Saudi decision to cut production by 1 million barrels per day unilaterally,” the president of analysis firm Rapidan Energy, Bob McNally, told CNBC in an e-mail following the decision.
“It once again demonstrated that Saudi Arabia is willing to act unilaterally to stabilize oil prices,” McNally said, citing the example of January 2021 when the oil titan unilaterally cut by production by 1 million barrels per day.
“We see large global deficits materializing in the second half of 2023 and crude prices exceeding $100 next year,” he added.
Similarly, Kang Wu, head of global demand and Asia Analytics at S&P Global Commodity Insight, estimates that the significant rise of global oil demand in the Northern Hemisphere’s summer season will lead to an oil inventory draw and “support higher oil prices” over the coming months. (World News Era)