Oil has risen sharply on OPEC+ production cuts

The oil market showed a sharp increase in quotations on Monday morning: Brent crude jumped to $86.44 per barrel, North American WTI crude – to $81.58 per barrel. 

The driver of such rapid growth was the results of the OPEC+ meeting held this weekend. The meeting resulted in the decision of 8 of the 20 countries of the alliance, including Russia and Saudi Arabia, on a voluntary additional reduction in oil production from May to the end of the year.

The total decrease in oil production will be approximately 1.657 million b/d, of which 500 thousand b/d will fall on the leaders of the deal – Russia and Saudi Arabia. From non-OPEC+ countries, Kazakhstan (by 78 thousand b/d), Oman (40 thousand b/d) are going to reduce production. 

Among the OPEC countries, the UAE will reduce production by 144 thousand b/d, Kuwait – by 128 thousand b/d, Iraq – by 211 thousand b/d, Algeria – by 48 thousand b/d, Gabon – by 8 thousand b/d.

Analysts note that global producers are clearly unhappy with the recent drop in oil prices, which was more speculative than caused by fundamental factors. And most likely, OPEC will be able to return oil quotes to the area above $ 80 per barrel for quite a long time. 

In addition, some experts believe that the announced production cuts may raise prices by another $10 per barrel from current levels. For example, Goldman Sachs Group raised its forecasts for Brent prices after announcing cuts to $95 per barrel by the end of 2023 and to $100 for 2024.