Showing posts from April 2, 2023

OPEC+ production cuts failed to excite the oil markets

Oil price - April 6 The price of crude oil, despite going up by almost 6% on Monday morning, thanks to the abrupt production cuts announced by the OPEC+, lost it momentum again as the days wore on.  As of 11:00 GMT, the prices of WTI and Brent were at $79.48 and $84.56 respectively. The OPEC+ announced on Sunday that they were going to cut down on production as a 'precautionary measure'; it coincided with the Chinese factory data, released 24 hours earlier, that showed the manufacturing activities took a dive in March for inexplicable reasons. Up until a few hours before the abrupt announcement, the OPEC+ had been maintaining the polar opposite: there would not be any production cuts. The move, as it turned out after a few days, did not excite the markets; nor did it push the prices up to unsustainable levels, estimated by some analysts as a hike by at least $10.  On the contrary, as the initial puff died down, the prices clearly started showing the signs of creeping into stati

Why did the members of the OPEC+ change their hearts suddenly?

The sudden announcement by the OPEC+ - OPEC plus Russia - took us, the mere mortals, by surprise and it was a bolt from the blue, indeed.  The prominent members of the group announced that they would opt in for voluntary cuts in crude oil production from May; the numbers are not insignificant and the effect will be felt in the markets this week, reversing the downward trend that we have been witnessing for the past fifteen weeks. Saudi Arabia, the de facto leader of the OPEC+, said it would cut 500,000 barrels per day - bpd; Kuwait, Oman, the UAE, Iraq and Kazakhstan are planning to make their own production cuts too, ranging from 40,000 bpd to 211,000 bpd.  In short, the cumulative impact on the supply side of the crude oil markets will be significant and in inverse proportion to the cuts, the price of crude oil in the markets will go up; some analysts fear it  could go up by as much as $10. Much to the embarrassment of the US, Russia joined the bandwagon too by announcing its own pro

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