OPEC+ Announces Oil Output Cuts, Triggers Surge in Crude Oil Prices
- OPEC+ and Saudi Arabia announced 1.16 million bpd oil output cuts
- The move is aimed at stabilizing the oil market
- Goldman Sachs predicts oil prices may hit $100 mark due to cuts
U.S. benchmark West Texas Intermediate crude oil futures are up sharply on Monday, but well off its high for the session after gapping $4.77 higher on both the daily and weekly charts. The bullish move was triggered when Saudi Arabia and other OPEC+ oil producers on Sunday announced further oil output cuts of around 1.16 million barrels per day. The surprise decision caught analysts and traders by surprise.
The reduction in oil output can lead to a decline in supply, resulting in higher crude oil prices. However, the sudden surge in demand for crude oil futures followed by a retreat from session highs suggests some uncertainty in the market about the oil rally’s sustainability. This may have been fueled by U.S. government officials who labeled the decision as inadvisable.
OPEC+ Announces Voluntary Oil Cuts Through End of 2023
OPEC+ voluntary oil cuts will start in May 2023 and continue until the end of that year, in a move aimed at stabilizing the oil market.
Russia’s Deputy Prime Minister, Alexander Novak, announced Russia’s plan to trim oil production by 500,000 barrels per day until the end of 2023.
Other member states, including OPEC’s Kingpin, Saudi Arabia, and UAE, have also pledged cuts, as well as Kuwait, Oman, Iraq, Algeria, and Kazakhstan.
Goldman Sachs Predicts OPEC+ Cuts Could Push Oil Prices to $100 Mark
The cuts may push oil prices up to the $100 mark, Goldman Sachs says. Daan Struyven and other Goldman Sachs analysts said the surprise cut is “consistent” with OPEC+’s doctrine to act preemptively.
Rapidan Energy Group President, Bob McNally, said oil prices could potentially “make a dash for $100 … if Chinese demand goes back to 16 million barrels a day in the second half of this year, [and] if Russian supply starts to go off because of sanctions and so forth.”
OPEC+ Cuts Bring Total Reduction to 3.66 Million BPD
The total volume of cuts by OPEC+ brings them to 3.66 million bpd or 3.7% of global demand. The cuts could lift oil prices by $10 per barrel and will be an immediate jump once trading starts after the weekend.
The main trend is up according to the daily swing chart with the high of the year at $82.98 the next key target. This is a potential tirgger point for a surge to $86.40.
On the downside, the nearest support is the retracement zone at $76.06 to $75.49.