OPEC+ recently made a surprise announcement of cutting crude oil production. This took the oil market traders by surprise and sent the oil prices higher.
In fact, the increase in oil prices was one of its biggest daily gains in one year time. According to experts, the recent increase in oil prices jolted the markets as it was totally unexpected.
Brent Crude Is Up By 5%
Brent Crude oil was up by 5%, which is roughly equal to around a $4 price increase. After touching a high of $86.44, the oil benchmark index was last seen trading near $83.89.
Similarly, the WTI (West Texas Intermediate) crude index also gained 5% ($4) and was trading near $79.39 per barrel. This is one of the highest levels for the WTI since January.
Overall, the OPEC+ countries announced oil production cuts equal to 1.16 million bpd (barrels per day).
The OPEC+ group earlier announced a decision to cut its oil output by around 2 million barrels per day. This oil cut will continue until the end of December.
Overall, this means the OPEC+ proposed oil cuts have reached a total of 3.66 million barrels per day. This is almost equal to around 3.7% of the world's oil supply.
After this development, the analysts at Goldman Sachs also revised its oil production forecast lower. The new forecast is set at 1.1 million barrels per day, and the Brent Crude Oil forecast is set to $95 - $100 for this year and 2024.
As per the forecast by Goldman Sachs, these output cuts will boost oil prices by 7%. This means that OPEC+ members and Saudi Arabia will enjoy higher oil revenues.
In the USA, this move by the OPEC+ countries was not liked by the Biden administration, which termed it unwise.
For many experts, there was no rationale for a move like this by the OPEC+ members. According to them, the banking crisis is now brought under control, which makes the whole reasoning very preemptive.