On Monday, the Organization of the Petroleum Exporting Countries (Opec) and its allies unexpectedly announced a drastic 1.6 million barrel per day reduction in production, sending crude oil prices surging over 5% worldwide.
Details about Oil prices increased 5% as Opec and its partners unexpectedly reduced supply
Brent June contract on the ICE was trading at $84.00 per barrel at 3:15 p.m., up 5.14% from its previous close. The price of a barrel of Western Texas Intermediate (WTI) futures increased 5.55% to $79.87.
Saudi Arabia declared the decrease will go into effect in May and described it as a “precautionary measure” meant to stabilise the oil market.
Markets had anticipated that Opec+ will maintain output.
After deciding to reduce its production by 500,000 barrels per day through December 2023, Russia made the announcement. Saudi Arabia would reduce production by 500,000 barrels daily, and the UAE would reduce output by 144,000 barrels daily.
According to OPEC+’s most recent declaration that it will reduce output by roughly 1.16 million barrels per day (bpd) from May through the end of the year, crude oil prices are expected to climb. The market had anticipated OPEC+ to maintain output levels, thus the cartel’s announcement comes as a surprise. The most recent reduction puts OPEC+’s overall output reduction to 3.66 million bpd, according to Rahul Kalantri, vice president of commodities at Mehta Equities Ltd.
According to him, the most recent output decrease might increase oil prices by $10 per barrel. “We anticipate continued volatility in crude oil prices in today’s session, “said Kalantri.
“On Sunday, output will be reduced by almost 1.16 million barrels per day, and the commitments would raise OPEC+’s total volume of cutbacks to 3.66 million bpd, “Sriram Iyer, a senior research analyst at Reliance Securities, stated.
According to Saumil Gandhi, senior analyst for commodities at HDFC Securities, the cut could result in a reduction of up to 1% of the world’s oil supply starting in May.
With NYMEX WTI crude oil anticipated to retest $82.0 per barrel if price crosses this level, then it will rally towards $87 per barrel, “we expect crude oil prices can rally further after change in supply equilibrium. According to him, the price of NYMEX WTI Crude oil encounters resistance at $82.0/$87.0 per barrel and finds support at $75.0 per barrel.
The reopening of China’s economy and ongoing geopolitical tensions, according to experts, may help crude oil reach the $100 per barrel milestone once more as a result of the most recent round of supply cuts.
Due to worries about a US banking crisis and its potential effects on the global economy, oil prices had fallen precipitously in March, with Brent falling below the $75 per barrel threshold.
India would be impacted by the output reduction and price increase that would follow, as the nation imports 85% of its energy needs. High inflation has been a persistent problem in India. Retail inflation in India decreased to 6.44% in February from 6.52% in January, but it still exceeded the Central Bank of India’s tolerance level.
Rising crude oil prices could eventually have an impact on India’s inflation rate.
