Oil prices rose today, Monday, after several major producers, most notably Saudi Arabia and Russia, announced yesterday, Sunday, a reduction in production, starting from next May until the end of 2023.
Oil prices rose today, Monday, after several major producers, most notably Saudi Arabia and Russia, announced yesterday, Sunday, a reduction in production, starting from next May until the end of 2023.
The production of the OPEC + group is equivalent to about 40 percent of the total crude oil production in the world, and the amount that was announced to reduce among the participating countries is about 1.66 million barrels per day.
On Monday, Brent crude prices rose by about 5 percent per barrel to $84, while West Texas Intermediate crude prices rose 5.84 percent to $79.83 per barrel, the sharpest rise in nearly a year for Monday.
Energy giants Shell and BP saw their share prices rise by more than 4 percent.
Increased pressure on inflation
Experts and economists warn that the rise in oil prices will make it difficult for governments to reduce the cost of living amid an alarming inflation crisis in the West andBut diminished in recent weeks.
OPEC+ says it took these measures to “stabilize markets”.
However, there are also those who say that the current rise in oil prices will not inevitably and directly affect the consumer’s energy bills. In any case, the issue is not settled, as this is related to prices in the coming weeks and months.
What does the OPEC + decision mean?
economically and financially
Experts believe that the OPEC + group is trying to maintain the price of $ 80 a barrel through these measures, in the medium term, while expert Tina Ting told the American network “CSBC” that “OPEC + is in fact aspiring to reach the price of a barrel of $ 100.”
Goldman Sachs analysts said Sunday that the move was surprising but consistent with the new OPEC+ doctrine of acting proactively. According to them, OPEC can make this type of decision without significant losses in market share.
Oil prices rose with Russia’s invasion of neighboring Ukraine in late February last year, but prices have recently fallen back to their pre-war level.
politically and socially
The United States has repeatedly called on producers to increase production in order to push down energy prices. “We don’t think cuts are advisable at this point in time, given the uncertainty in the market,” John Kirby, a spokesman for the US National Security Council, said at the end of last week.
Despite the price fluctuations in recent months, there were concerns that global demand for oil might outstrip supply, especially towards the end of the year.
The increase in oil prices after Sunday’s announcement is likely to put further pressure on inflation, exacerbating the cost of living crisis and increasing recession risks.
The production cut is also likely to further strain relations between the United States and Saudi Arabia. The White House had called on the group to increase supplies to calm prices and to examine Russia’s finances.
However, Sunday’s announcement also underscores the close cooperation between the oil-producing countries and Russia.
How will the decision relieve Moscow?
The decision to cut production led to a rapid rise in oil prices, especially as it falls within a context of strong demand with the reopening of the Chinese economy, the world’s largest oil importer.
This rebound in prices is particularly beneficial to Russia, which needs oil to finance its costly war in Ukraine, says Bjarne Schildrup, an analyst at SIB bank.
What makes the decision even more important is that Moscow is subject to many Western sanctions in response to its invasion of Ukraine. The aim of these sanctions was precisely to reduce Russia’s oil revenues.
The SIP expert says that the decision thus confirms that “Russia is still an integral and important part” of the OPEC + group.
The decision also further strengthens the Saudi-Russian relations, which were not shaken by the war, but rather strengthened, as experts who monitor this strong common front in the face of the turmoil that took place in the past months draw attention.
