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Oil Prices Spike After OPEC+ Unexpectedly Production Cuts

Abdulaziz bin Salman Al Saud Minister of Energy of Saudi Arabia
Saudi Press Agency | Reuters

On Monday, oil prices significantly rose after OPEC+ producers confirmed they would reduce output.

The price of the global benchmark, Brent crude, increased significantly by 5.31%, reaching $84.13 per barrel. The U.S. benchmark WTI also rose by 5.48%, settling at $79.83. This was the biggest price increase in almost twelve months.

A week after the collapse of Silicon Valley Bank in the United States on March 10, crude oil prices dropped to as low as $73 and $67 a barrel, respectively, as the uncertainty spread to the entire financial industry, causing investors to worry about a possible worldwide recession.

Oil prices rising could potentially cause inflation to stay higher for an extended period of time, which would create tension for customers everywhere.

“The development comes as a blow for inflation,” said lead equity analyst at Hargreaves Lansdown, Sophie Lund-Yates on Monday. “Markets are aware that if the pressure continues, central banks will need to extend or strengthen their interest rate hiking cycles.”

On Sunday, the Organization of the Petroleum Exporting Countries (OPEC) announced that Saudi Arabia, along with other OPEC members and allies, will begin “a voluntary reduction” in crude oil production.

According to Saudi news agency SPA, a Saudi Ministry of Energy official said that the reductions will begin in May and continue through the end of the year.

In addition to the OPEC+ cuts announced last October, SPA reported that more reductions are being made.

The oil industry came to an agreement that month to reduce production by 2 million barrels per day, the greatest drop since the beginning of the pandemic and equal to around 2% of world oil demand.

Saudi Arabia has announced that it will reduce oil output by another 500,000 barrels per day.

There will also be a drop of 211,000 bpd in production from Iraq, and a drop of 144,000 bpd from the United Arab Emirates.

Kuwait, Algeria and Oman will each reduce output by 128,000, 48,000 and 40,000 barrels per day, respectively.

Original source material for this article taken from here

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