Several Opec Plus countries have announced on Monday their unforeseen decision to cut their oil production, causing a surge in oil prices.
Brent crude hiked 5.31 percent reaching $84.13, while West Texas Intermediate increased 5.48% to $79.83. This price surge is the highest recorded increase in about a year, according to CNN.
Saudi Arabia is decrease output by 500,000 barrels per day (bpd), Iraq will cut production by around 200,000 bpd. The United Arab Emirates (UAE) will also lower output by 144,000 bpd, with these countries constituting the largest but not the only production cuts. Saudi Arabia, Iraq, and UAE are also joined by Kuwait, Algeria and Oman.
Saudi Ministry of Energy stated the cuts are scheduled to start in May and should last through the end of the year. In a similar vein, Russian Deputy Prime Minister Alexander Novak stated on Sunday Russia is to extend its reduction of 500,000 bpd until the end of the year.
Price surge threatens to make curbing inflation even harder Yael Selfin told BBC. The chief economist at KPMG explained rising prices would not necessarily affect households directly. However, they are likely to affect transportation costs, which “could feed into other costs.”
Sameer Hashmi, Middle East business correspondent told BBC it is possible other bloc members decide to take the same action. Goldman Sachs analysts, as reported by CNN, said production cuts, although sudden, are “consistent with the new OPEC+ doctrine to act pre-emptively because they can without significant losses in market share.”