OPEC’s additional cut in oil production may push fuel prices further uptext_fields
Singapore: The crude oil prices are likely to touch around $100 a barrel with OPEC’s decision to cut production further, which would, in turn, create a short supply in the market.
On Monday, oil prices surged over $4 per barrel following the announcement of further production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia.
The new cuts of approximately 1.16 million barrels per day, starting from May and continuing through the year's remainder, will bring the total volume of cuts by OPEC+ to 3.66 million bpd since November 2022, equivalent to 3.7 per cent of global demand.
Previously, OPEC+ had been anticipated to maintain steady output levels in 2023 after cutting production by 2 million bpd in November 2022.
Analysts at Rystad Energy predict that the cuts will tighten the oil market further, pushing prices above $100 per barrel for the rest of the year, with Brent potentially reaching $110 this summer.
Goldman Sachs raised its December forecast by $5 to $95, while UBS expects Brent to reach $100 by June. Goldman Sachs also suggested that the OPEC+ action might have been prompted by strategic petroleum reserve releases in the US and France, ongoing strikes in France, and Washington's refusal to refill its SPR in the 2023 fiscal year.
Meanwhile, a South Korean refining official has called the cuts "bad news" for oil buyers, accusing OPEC of protecting its profit against global economic concerns.
According to the official and a Chinese trader, the supply cut will drive up prices at a time when weakening economies are suppressing fuel demand and prices, hurting refiners' profits.