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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Oil Prices Soar As OPEC+ Shocks The Market

  • On Sunday, OPEC+ announced a surprise production cut of some 1.66 million barrels per day, increasing the total OPEC+ cut to 3.66 million bpd.
  • Oil prices soared on the news, climbing by 8% initially before falling back slightly.
  • The U.S. criticized the move, saying that it wasn’t wise to make cuts given the current market uncertainty.
OPEC

OPEC+ on Sunday surprised oil markets with an announcement that it will reduce its output further, by some 1.66 million barrels daily.

Reuters noted in a report that with the new cut, the total output reduction amount from OPEC+ will come in at 3.66 million barrels daily, or 3.7% of global oil demand.

The Financial Times reported that oil prices had gained 8% immediately after the announcement, noting Saudi Arabia’s share of the cuts would be almost half of the total, at 500,000 bpd.

Russia, meanwhile, said it would extend the production cuts of 500,000 bpd it announced earlier this year until the end of 2023.

The FT noted the unusual nature of the announcement as it was made outside the group’s regular monthly meetings, the next of which is taking place today.

The U.S. administration expectedly criticized the move, saying it was not the time to cut production.

“We don’t think cuts are advisable at this moment given market uncertainty — and we’ve made that clear,” a spokesperson for the National Security Council said, as quoted by The Hill.

“But we’re focused on prices for American consumers, not barrels, and prices have come down significantly since last year, more than $1.50 per gallon from their peak last summer,” the spokesperson, who was not named in the Hill report, added.

The move by OPEC+ to curb production further came after the sharp drop in oil prices last month, largely driven by concern about the banking industry after a couple of sizeable bank collapses in the United States.

The events sparked concern about the stability of the Western banking system, reinforced by the near-death experience of Credit Suisse, and fear of a recession that would affect oil demand.

"OPEC is taking pre-emptive steps in case of any possible demand reduction," Energy Aspects’ Amrita Sen told Reuters.

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By Irina Slav for Oilprice.com

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Leave a comment
  • Al Goobi on April 03 2023 said:
    US is a net importer of oil. US admin likes the low oil cost, paying in fiat of course, but taking inflation into account oil is as cheap as its ever been in modern history. Cannot be this way for a long time. Just cant. Its an economic impossibility.
  • DoRight Deikins on April 03 2023 said:
    Isn't this the same US administration that wanted all oil production to stop?

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