Oil prices surged on Monday after OPEC+ producers revealed surprise cuts to their output. Brent crude, the worldwide benchmark, leapt 5.31% to $84.13 a barrel, while the US benchmark, WTI, climbed 5.48% to $79.83. Both moves represented the largest one-day price increases in close to a year.
The two oil prices dipped as low as $73 and $67 a barrel, respectively, immediately after the collapse of Silicon Valley Bank on March 10, with fears of a global recession spreading from the banking sector.
Now, with oil prices rising, inflation could stay higher for longer, adding further strain to an already- pressing issue for consumers around the world. Market participants know that if the pressure continues, central banks will need to extend or strengthen their interest-rate-hiking cycles.
The oil cuts will start in May and persist through to the end of the year. This round of cuts come on top of those announced by OPEC+ in October, at which time the group slashed output by two million barrels a day, equivalent to 2% of global oil demand.
What does this mean for me?
Shares in major oil firms received a boost Monday, with Shell up 4.21%, BP 4.64% higher, and France’s TotalEnergies jumping 4.56%.
The administration of US President Joe Biden is unhappy with the latest decision, decrying it and pointing to the market uncertainty it will cause. When the news of the first OPEC+ cuts broke, US President Joe Biden pledged to make Saudi Arabi suffer “consequences,” indicating the gravity of the topic.