By Adedapo Adesanya
Oil benchmarks jumped 6 per cent on Monday as the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) surprised the markets with plans to cut more production.
Brent crude settled higher by $5.04 or 6.3 per cent at $84.93 per barrel, while the US West Texas Intermediate (WTI) crude went up by $4.75 or 6.3 per cent to trade at $80.42 per barrel.
On Sunday, OPEC+ members, led by Saudi Arabia and other major Middle Eastern producers, announced a fresh combined cut of 1.16 million barrels per day until the end of this year.
The latest pledges bring the total volume of cuts by OPEC+ to 3.66 million barrels per day, including a 2 million barrel cut last October, equal to about 3.7 per cent of global demand.
OPEC+ leader, Saudi Arabia, also led the cartel by pledging its own 500,000 barrel-a-day supply reduction.
Fellow members, including Kuwait, the United Arabia Emirates (UAE), and Algeria, followed suit. The UAE said it would cut production by 144,000 barrels per day, Kuwait announced a cut of 128,000 barrels per day, while Iraq said it would cut output by 211,000 barrels per day, and Oman announced a cut of 40,000 barrels per day. Algeria said it would cut its output by 48,000 barrels per day.
This is on top of Russia announcing that its own 500,000 barrels per day cut until June would extend to the end of 2023.
This development has raised fears of tightening supplies while some warned of reduced demand if oil refiners raise issues over paying higher prices for crude.
The move by OPEC+ to curb production further came after the sharp drop in oil prices last month, largely driven by concern about the banking industry after a couple of sizeable bank collapses in the United States.
The events sparked concern about the stability of the Western banking system after three banks collapsed, followed by the near-death experience of Credit Suisse and fear of a recession that would affect oil demand.
