Oil prices surge 8% after OPEC’s surprise output cut; analysts warn of $100 per barrel

Oil prices surged as much as 8% at the open after OPEC+ announced it was slashing output by 1.16 million barrels per day.
Brent crude futures last jumped 5.07% to $83.95 a barrel on that news, and U.S. West Texas Intermediate crude futures soared 5.17% to $79.59 a barrel.
The voluntary cuts will start from May to end 2023, Saudi Arabia announced, saying it was a “precautionary measure” targeted toward stabilizing the oil market.
The move comes on the back of Russia’s decision to trim oil production by 500,000 barrels per day until the end of 2023, according to the country’s Deputy Prime Minister Alexander Novak.

In addition to Saudi Arabia’s output cut of 500,000 barrels per day, other member states have also pledged cuts: the UAE will be cutting output by 144,000 barrels per day, while Kuwait, Oman, Iraq, Algeria and Kazakhstan will also be reducing output.
“The selected involvement of the largest OPEC+ members suggest that adherence to production cuts may be stronger than has been the case in the past,” Commonwealth Bank of Australia’s Vivek Dhar said in a note.

“OPEC+‘s plan for a further production cut may push oil prices toward the $100 mark again, considering China’s reopening and Russia’s output cuts as a retaliation move against western sanctions,” CMC Markets’ analyst Tina Teng told CNBC.
Teng noted, however, that the cut could also reverse the decline in inflation, which would “complicate central banks’ rate decisions.”
In March, oil prices tumbled to their lowest since December 2021, as traders feared the banking rout could dent global economic growth.