The unexpected announcement of a cut in oil production of more than one million barrels per day starting in May by some OPEC countries has led to an increase in crude oil prices. Futures are up more than 5% on Monday, with Brent futures at $84 a barrel and Texas oil (WTI) futures at $79.
The decision to reduce the pumping of this raw material comes on the eve of a virtual meeting of an OPEC committee, led by Saudi Arabia and Russia, in which it will assess whether the market situation justifies the readjustment of the supply. The measure, which is added to the cut of two million barrels per day in force for five months, will be extended until the end of the year. From Goldman Sachs they consider that the decision “is consistent” with the new doctrine of the organization “to act preventively”.
Some analysts calculate that the decrease in the pumping of “black gold†will mean a reduction of at least 1% in world oil supply starting next month. The direct consequence is the rise in the price of a barrel of oil. Goldman’s forecast is for Brent to hit $95 a barrel by the end of the year and $100 by 2024, which would have “significant economic and probably political considerations.” An increase in energy costs would complicate the objective of the Federal Reserve and the European Central Bank (ECB) of managing to moderate inflation at a time when, in addition, the data indicates a slowdown in the evolution of prices.
After Russia’s invasion of Ukraine in February 2022, oil prices had skyrocketed but recently returned to pre-conflict levels after falling 22% in the past year. Likewise, the cut in production announced by Saudi Arabia, Iraq and several Gulf countries contrasts with the request by the United States to the large producers to intensify the pumping of this raw material to achieve a decrease in energy costs, one of the factors that more has contributed to the escalation of prices registered during the exit from the Covid crisis.
