Oil Rallies over Tight Supply Outlook
Oil edges higher first trading day in the new week amidst a weak supply outlook following large production cut by the Organisation of Petroleum Exporting Countries (OPEC) and its allies (OPEC+).
The latest move to drive prices upward has been identified as a downside to curbing the global inflation rate – a trend that was triggered by covid-19 pandemic and then Russia-Ukraine war – pushing energy costs higher.
Brent crude oil rose 5.2% at $84.03 a barrel. WTI also gains 5.2% to $79.58 a barrel. For both varieties, the moves take prices back to their levels at the start of March, before concerns about the health of global banks sent prices tumbling.
The market reacted to OPEC+ oil production cut of more than 1 million barrels per day (bpd), raising concerns about further interest rate hikes and weaker economic growth.
Both benchmarks rose around 5% after the OPEC+ group’s major oil producers announced a 1.65 million bpd cut in monthly production until the end of the year over the weekend.
Saudi Arabia led the way with 500,000 bpd of cuts, followed by the UAE with 144,000 bpd, Kuwait with 128,000 bpd, Iraq with 211,000 bpd, Oman with 40,000 bpd, Algeria with 48,000 bpd, and Kazakhstan with 78,000 bpd.
Meanwhile, Russia said it would extend its planned 500,000-barrel-a-day cut until the end of the year.
Russian Deputy Prime Minister Alexander Novak said on Sunday that the global oil market is living through a period of high volatility and unpredictability due to the continuing banking crisis in the US and Europe, the global economic uncertainty, and unpredictable and short-sighted energy policy decisions.
‘Predictability on the global oil market is a key element of energy security,’ he stressed. Meanwhile, a spokesperson for the US National Security Council (NSC) on Sunday described the OPEC+ production cut decision as not ‘advisable.’
‘We will continue to work with all producers and consumers to ensure energy markets support economic growth and lower prices for American consumers,’ the NSC spokesperson said.
Limiting further price increases, uncertainties over the US banking system are still looming, as the country is set to bring in new measures to bolster the financial system in the long term. #Oil Rallies over Tight Supply Outlook