By Ambar Warrick
Investing.com -- Oil prices shot up in early Asian trade on Monday after the OPEC+ unexpectedly cut production further to stabilize markets hit by fears of slowing economic growth and a potential banking crisis.
Brent oil futures jumped 6.2% or $5 to $84.19 a barrel, their strongest level in nearly a month, while West Texas Intermediate crude futures rose 6.3% or $4.8 to $80.45 a barrel, and were trading close to levels seen in late-January by 20:01 ET (00:01 GMT). Both contracts have now reversed the steep losses seen through March.
The Organization of Petroleum Exporting Countries and allies, known as OPEC+, said on Sunday it will cut production by about 1.16 million barrels per day (bpd), ducking prior expectations that the cartel will maintain output.
The cut now brings total production cuts by members of the cartel to 3.66 million bpd, which includes a 2 million bpd cut by the OPEC in October, as well as a 500,000 bpd cut promised by Russia.
Saudi Arabia, which leads OPEC, accounts for the largest portion of the latest cut, at 500,000 bpd, followed by a 211,000 bpd cut by Iraq and a 144,000 bpd cut by the United Arab Emirates.
The move, which was unexpectedly announced on Sunday, comes ahead of a virtual meeting of the Joint Ministerial Monitoring Committee of the OPEC on Monday, which media reports had suggested was likely to result in production being kept steady.
Still, the OPEC’s moves come as oil prices crashed to 15-month lows in March after the collapse of several U.S. banks drummed up concerns over slowing economic growth and weakening crude demand.
Some OPEC members had vowed to intervene and “stabilize” crude markets in the wake of the crash.
Investment bank Goldman Sachs hiked its price forecasts for Brent by $5 to $95 a barrel by December 2023, following the OPEC+ cut.
The Biden Administration said that the OPEC cuts were not advisable, and that it will continue to target bringing down gasoline prices for consumers. The White House had released over 100 million barrels of crude from the Strategic Petroleum Reserve through 2022 to this end.