Oil prices soar after OPEC+ decides to maintain production cuts

Oil prices soared after The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, decided to maintain a status quo on its output policy.

This means that voluntary production cuts of 2.2 million barrels per day (bpd) will stay in place at least till the end of June, in addition to the existing 3.66 million bpd of cuts decided in 2022, a report indicated.

Brent futures, which is the global benchmark, inched within a cent of the $90/barrel mark following the news while West Texas Intermediate futures moved closer to the $86/barrel level. Crude futures on the MCX were trading close to ₹7,134/barrel during Thursday afternoon trade.

“The Committee welcomed the Republic of Iraq and the Republic of Kazakhstan pledge to achieve full conformity as well as compensate for overproduction. The Committee also welcomed the announcement by the Russian Federation that its voluntary adjustments in the second quarter of 2024 will be based on production instead of exports,” OPEC said in a statement.

Oil has had a decent run since the end of last year. A range of factors including the Israel-Hamas conflict, Ukrainian attack on Russian refineries, production cuts by the OPEC+ as well as surging demand have led to the surge in oil prices this year. Brent futures rose from near the $73/barrel mark in December 2023 to near $90/barrel in a matter of just over three months.

Other factors also appear to be working in favour of the commodity. In a recent speech, the U.S. Federal Reserve Chair Jerome Powell communicated his cautious stance on potential rate cuts given the solid job growth. “Recent readings on both job gains and inflation have come in higher than expected,” Powell stated in a speech at the Stanford Graduate School of Business, according to a report. This augurs well for oil as it reflects an upbeat economy which influences demand for the commodity.