When Russia invaded Ukraine in February 2022, world suffered among other things oil prices surge leading to the price increment of most commodities. This had, however, begun to stabilize over months.
Today, the same is happening following the world’s largest oil exporters announcing surprise cuts in oil production.
According to BBC, the price of Brent Crude oil jumped by more than $5 a barrel, or 7%, to above $85 as trading began.
The reduction in output can be blamed on the members of the Opec+ oil producers who account for about 40% of all the world’s crude oil output.
The US is the top producer of oil, but the country requires foreign imports to meet its increasing domestic demand. According to the IEA, the nation sources oil from as many as 73 countries around the globe. The top five are Canada, Mexico, Russia, Saudi Arabia and Colombia.
Saudi Arabia, Iraq and several Gulf states said on Sunday they were cutting output by more than one million barrels a day.
Saudi Arabia is reducing output by 500,000 barrels per day and Iraq by 211,000. The UAE, Kuwait, Algeria and Oman are also making cuts.
This triggered the US to call on oil producers to increase output as a measure to push down energy prices.
“We don’t think cuts are advisable at this moment given market uncertainty – and we’ve made that clear,” said Gordon Johndroe – spokesperson for the US National Security Council.
A Saudi energy ministry official said the move was “a precautionary measure aimed at supporting the stability of the oil market”, the official Saudi Press Agency said.
According to Nathan Piper, an independent oil analyst, the move by Opec+ appeared to be an attempt to keep the oil price above $80 a barrel in the medium term, given that demand could be hit by a weakening global economy and sanctions have had a “limited impact” on restricting Russian oil supplies.