With OPEC+’s announcement to cut output on Monday, oil prices jumped on Tuesday as investors focused on demand and the global economy.
At 0925 GMT, Brent crude futures rose 43 cents, or 0.5%, to $85.36. WTI oil futures rose 47 cents to $80.89 a barrel.
OPEC+’s Sunday announcement of voluntary production cutbacks of 1.66 million barrels per day (bpd) from May through 2023 sent both benchmarks up more than 6% on Monday.
The other promises increase OPEC+’s total cutbacks to 3.66 million bpd, including a 2 million barrel cut last October, equal to 3.7% of world demand.
“Oil prices might easily reach beyond $100 a barrel,” said FGE consultant Fereidun Fesharaki.
“Our future balances reflect a very high inventory draw until end 2023,” he continued.
Most experts expect Brent oil prices to be $100 per barrel by year-end due to OPEC+ output cuts. However, Goldman Sachs raised its Brent projection to $95 a barrel this year and $100 for 2024.
“The rationale for the cut… is not evident from the very limited public pronouncements that have been made,” said Investec commodities director Callum Macpherson.
“It may be due to concerns about the spillover of stock current market volatility into oil prices or because members see a vulnerability in the physical market that the wider market does not,” he added.
Investors worried about greater company and consumer expenses and a global inflationary jolt from rising oil prices, which might lead to further rate rises.
Market observers are trying to predict how long the U.S. Federal Reserve will need to raise interest rates to calm inflation and if the economy will enter a recession.
March was the lowest industrial activity in nearly three years in the U.S. Tighter credit and higher borrowing rates might lower it further.
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