Prices have eased off since the jump on the open and thin liquidity within the market at the time may have exasperated the initial move. It is being reported that last week several OPEC+ officials had inferred that there would not be any near-term cut in production.
The cut of over 1 million barrels per day comes on top of news last week that Turkey will no longer be able to source oil from Kurdistan due to an international court of arbitration ruling.
It is estimated that it will leave global markets with 400k-450k fewer barrels per day from that source.
Additionally, Russia has previously stated that they will maintain their production cut of 500k barrels per day through to the end of the year.
Within OPEC+, Saudi Arabia will do most of the heavy lifting, lowering their production by 500k barrels per day.
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It seems that the syndicate might be looking at the Fed rate hike cycle as playing its role to slow down economic activity in the world’s largest economy.
Somewhat ironically, the squeeze on oil supply might contribute to inflationary pressures that could see the Fed further reassess its tightening measures.
In response to the cut, a US spokesperson for the National Security Council said, “We don’t think cuts are advisable at this moment given market uncertainty.”
China’s move out of pandemic restrictions has not led to the boost in global economic activity that many had hoped for and may have also played a role in the decision.
The unorthodox announcement from the cartel comes a day ahead of the OPEC+ monitoring committee meeting.
The WTI futures contract topped out at US$ 81.69 bbl in early trade while the Brent contract touched US$ 86.44. Both contracts have retraced lower since making those highs.
WTI CRUDE OIL CHART ILLUSTRATING THE AGGRESSIVE MOVE
— Written by Daniel McCarthy, Strategist for DailyFX.com
To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Crude oil prices leapt higher to start the week after an unorthodox announcement from OPEC+ to cut output, stoking concerns of a surge in inflation. Will WTI hold the gains?
Read more at : https://www.dailyfx.com/news/crude-oil-price-gaps-higher-on-opec-output-cut-compounding-supply-issues-higher-wti-20230403.html