Brent Crude oil price surged by over $5 a barrel, or 7%, to above $85 at the beginning of trading as several of the world’s largest oil exporters including Saudi Arabia, Iraq, and several Gulf states announced their decision to cut output by more than one million barrels a day on Sunday. While the oil prices soared due to Russia’s invasion of Ukraine, they are now back to the levels seen before the conflict. Meanwhile, the US has been urging producers to increase output to push energy prices lower.
Last year’s high energy and fuel prices contributed to inflation, which put a strain on many households’ finances. In response to the recent production cuts announced by OPEC+ members, a spokesperson for the US National Security Council expressed their opposition, stating that cuts are not advisable in the current market uncertainty.
The OPEC+ group accounts for approximately 40% of the world’s crude oil output. The reduction in output is being led by Saudi Arabia, which is reducing its output by 500,000 barrels per day, with Iraq reducing output by 211,000 barrels per day. The UAE, Kuwait, Algeria, and Oman are also participating in the cuts.
According to the official Saudi Press Agency, a Saudi energy ministry official explained that the cut in oil production was taken as a “precautionary measure aimed at supporting the stability of the oil market”.
Meanwhile, independent oil analyst Nathan Piper told the BBC that the decision by Opec+ members seemed to be an effort to maintain the price of oil above $80 per barrel in the medium term, due to the possibility of a weakened global economy impacting demand and limited effects of sanctions on the restriction of Russian oil supplies.
