That followed a decision by OPEC+ member Russia to prolong a reduction of 500,000 barrels per day.
Monday saw a sharp increase in global oil prices as several major producers, led by Saudi Arabia, announced unexpected supply reductions in defiance of US recommendations for increased production to control inflation.
The OPEC+ exporters’ coalition unexpectedly reduced output by a combined total of more than one million barrels per day in an effort to stabilise the market, sending crude futures surging by about 8% at one point.
Algeria, Iraq, Kuwait, Oman, Saudi Arabia, and the United Arab Emirates disclosed the shock decrease on Sunday. It will begin in May and extend through the end of the year.
That followed a decision by OPEC+ member Russia to prolong a reduction of 500,000 barrels per day.
“Caught markets off guard”
According to ActivTrades analyst Ricardo Evangelista, Sunday’s action “caught the markets off surprise” and reversed recent oil price increases.
“The price of the barrel was already showing symptoms of improving,” he said. “With the banking crisis fizzling out and the return of confidence to the markets.”
Oil prices returned to levels seen before to the financial crisis as a result of the OPEC+ declaration.
The reduction was the largest since OPEC+ reduced two million barrels per day late last year in a move that also infuriated Washington.
The revelation led to significant gains for key European energy companies and boosted the London and Paris stock indexes on Monday, however Frankfurt saw a decline.
In late morning London trades, shares of BP and Shell increased by roughly 4.5 percent, and TotalEnergies gained a similar percentage in Paris.
Rising oil prices increase the sector’s revenues and profitability.
The shocking weekend event, however, also stoked worries about a further rise in consumer prices that might compel central banks to raise interest rates even further and harm the world economy.
greater rates for a longer period of time?
According to Nigel Green, CEO of financial consulting firm deVere Group, “there is significant risk that the unexpected decision would lead central banks to retain interest rates higher for longer owing to the inflationary impact, which will hamper economic development.”
World shares were upbeat Friday as statistics showed that inflation was declining in the US and the eurozone.
As a result of Russia’s invasion of Ukraine, oil and gas prices skyrocketed last year, driving up energy costs and global inflation to levels not seen in decades.
It led to a string of aggressive interest rate increases, notably from the US Federal Reserve, in an effort to control rising consumer costs.
Green continued, saying that the unexpected drop in oil production on Sunday “would only exacerbate already severe inflationary pressures throughout the world.”
The cost of manufacturing and transportation will go up as a result of the rising oil prices, which will also diminish consumer spending power, upset supply chains, and raise inflation expectations.
During the last year, crude prices have decreased as supply issues generated by sanctions on Russia for its war in Ukraine have outweighed anxieties about a potential recession brought on by increasing borrowing rates.
Tapas Strickland of the National Australia Bank stated, “The output cut…clearly demonstrates OPEC was not satisfied with the trend in the oil price which has decreased over the recent months.”
Important information around 00:00 GMT
Brent North Sea crude: up 5.0 percent at $83.89 a barrel.
West Texas Intermediate: up 5.1 percent to $79.56 per barrel.
London’s FTSE 100 is up 0.7 percent at 7,685.67 points.
Paris’ CAC 40 is up 0.4 percent at 7,348.39.
Frankfurt’s DAX is down 0.1 percent at 15,619.66.
EURO STOXX 50: Up 0.1 percent at 4,319.46.
Tokyo’s Nikkei 225 is up 0.5 percent at 28,188.55. (close)
Hong Kong’s Hang Seng Index is FLAT at 20,409.18. (close)
Shanghai Composite: Up 0.7 percent at 3,296.40 (close)
Dow Jones in New York is up 1.3 percent at 33,274.15 (close)
The euro/dollar exchange rate increased to $1.0849 from $1.0839 on Friday.
Pound to dollar: FLAT at $1.2337
Up at 87.94 pence and 87.86 pence for the euro/pound.
Dollar/yen: Up at 133.44 yen from 132.86 yen.
AFP
