OPEC+ countries announced production cuts, oil prices rose sharply

The Organization of the Petroleum Exporting Countries (OPEC) and OPEC+ member countries, which consist of some non-OPEC producing countries, unexpectedly cut production. Oil prices rose sharply after the decision.

Saudi Arabia, Iraq, Algeria, Oman, the United Arab Emirates (UAE) and Kuwait have decided to cut oil production starting in May. The decision is seen as an alarming sign of global inflation.

The decisions were announced before the meeting of the Joint Ministerial Monitoring Committee that the OPEC+ countries will hold today. Saudi Arabia and Russia will also attend the meeting to be held today.

PRODUCTION CUT DECISION

Saudi Arabia described the cut as a measure to support market stability. Russia has also announced that it will cut 500,000 barrels per day in oil production.

With these decisions, the OPEC+ countries will cut 1.6 million barrels per day starting in May. The OPEC+ countries, at the meeting on October 5, 2022, decided to reduce daily oil production by 2 million barrels per day from November 2022.

According to calculations, with the decision announced, the reduction in total OPEC+ production since last year corresponds to 3.66 million barrels, or 3.7 percent of global demand.

PRICES RISE VERY STRONGLY

Brent crude rose sharply above $85 after the news of production cuts. Brent crude was trading at $83.56, up 4.5 percent as of 9:00 am US light crude was also up 5.4 percent at $79.72 a barrel, above the dollar.

US investment bank Goldman Sachs has raised its forecast for Brent crude to $95 a barrel by the end of the year and $100 in 2024.

USA NOT SATISFIED WITH DECISION

According to Reuters, analysts said that this unexpected step will cause a sudden increase in prices, while the US reacted to the decision.

The United States believes lower oil prices are needed to prevent Russian President Vladimir Putin from financing the war in Ukraine and to boost economic growth.