Oil prices jumped sharply on Monday with Brent crude surging to $84 after the Organization of the Petroleum Exporting Countries (OPEC) and 10 allies led by Russia agreed on massive output cuts, angering Washington because tighter supply boosts oil prices.
Crude oil futures were up in mid-morning Asian trade on April 3 due to heavy gains incurred by Brent markers after the US failed to support its price cap against Russian crude to prevent President Vladimir Putin from earning more revenues to fund the Ukraine war.
At the time of filing, Brent crude is up $3.98, or 4.98 percent at $83.87 a barrel, while the US West Texas Intermediate (WTI) crude gained $3.69, or 4.88 percent, to sit at $79.36 per barrel after markets resumed trade in green on Monday.
The unexpected voluntary cuts announced on Sunday, which will take effect in May, are in addition to those agreed to in October.
More details suggest Riyadh will reduce output by 500,000 bpd, while Iraq will reduce output by 211,000 bpd.
The UAE announced a 144,000 bpd reduction in production, Kuwait a 128,000 bpd reduction, Oman a 40,000 bpd reduction, and Algeria a 48,000 bpd reduction. Kazakhstan will also reduce output by 78,000 barrels per day.
Russia’s deputy prime minister announced that a voluntary cut of 500,000 bpd would be extended until the end of 2023.
The participation of the largest OPEC+ members indicates that compliance with production cuts may be stronger than in the past. This means that oil markets may see a 1 percent or greater reduction in global oil supply beginning in May. Meanwhile, the latest cuts could raise oil prices by $10 per barrel.
Pertinently, Goldman Sachs increased its Brent forecast to $95 per barrel by the end of the year and $100 in 2024.