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Crude oil prices jumped more than $5/bbl as trading opened, responding to Sunday’s surprise oil production cut across several OPEC+ nations.
U.S. WTI crude (CL1:COM) surged past $81/bbl at the open to its highest since late January, with the May contract recently +6.8% at $80.81/bbl, while June Brent crude (CO1:COM) opened at its best level in nearly a month at the open at ~$85.50/bbl before easing a bit to $85.29, +6.7%.
Production cuts totaling ~1.16M bbl/day will start in May and last until the end of 2023, led by Saudi Arabia’s ~500K bbl/day reduction, a 211K bbl/day cut by Iraq, 144K bbl/day by United Arab Emirates, and 128K bbl/day from Kuwait.
Russia said it would extend its 500K bbl/day cut started in February until the end of the year.
ETFs: (NYSEARCA:USO), (BNO), (UCO), (DBO), (SCO), (USL), (DRIP), (GUSH), (USOI), (NRGU), (XLE), (XOP), (VDE), (OIH)
Goldman Sachs lowered its year-end 2023 OPEC+ production forecast by 1.1M bbl/day and raised its Brent price forecasts for 2023 by $5/bbl to $95 and by $3/bbl to $100 for 2024.
“OPEC+ has very significant pricing power relative to the past, and today’s surprise cut is consistent with their new doctrine to act pre-emptively,” the bank said. “While surprising, this cut reflects important economic and likely political considerations.”
The decision is another clear signal that Saudi Arabia and its OPEC partners will seek to head off any further macro selloffs, RBC Capital analysts said, adding the move “will certainly not be welcomed by the White House.”
The OPEC+ cuts overshadowed an agreement between Iraq’s government and the semi-autonomous Kurdistan region to resume oil exports through Turkey this week; the supply disruption had helped WTI crude rally more than 9% last week.
Winners from the OPEC+ cuts include Saudi Arabia, Warren Buffett and electric vehicle manufacturers, while losers include airlines and hopes for an economic soft landing, Logan Kane writes in an analysis newly published on Seeking Alpha.