OPEC+ makes surprise oil cut in new inflation risk

Matthew Martin and Grant Smith

Updated Apr 3, 2023 – 8.48am,first published at 6.45am

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Riyadh | OPEC+ announced a surprise oil production cut of more than 1 million barrels a day, abandoning previous assurances that it would hold supply steady and posing a new risk for the global economy.

It’s a significant reduction for a market where – despite the recent price fluctuations – supply was looking tight for the latter part of the year. Oil futures soared as much as 8 per cent at the open on Monday, adding to inflationary pressures across the world that may force central banks to keep interest rates higher for longer and crimp economic growth.

Riyadh said the cuts were a “precautionary measure aimed at supporting the stability of the oil market.” AP

Saudi Arabia led the cartel by pledging its own 500,000 barrel-a-day supply reduction. Fellow members including Kuwait, the United Arabia Emirates and Algeria followed suit, while Russia said the production cut it was implementing from March to June would continue until the end of the 2023.

“OPEC+ clearly want a higher price,” said Gary Ross, a veteran oil consultant turned hedge fund manager at Black Gold Investors. The group “is following through on being proactive and ahead of the curve, and is trying to rip oil prices from the grip of” macro sentiment.

The surprise move could once again flare tensions between the US and Saudi Arabia, a regional partner whose relationship with President Joe Biden’s administration has been tense. The White House said that the new cuts were ill-advised.

At last some good news