Oil: prices soar after the announcement of major cuts in production

Oil prices jump by more than 5% on Monday, April 3, 2023. (Illustrative image) Copyright 2022 The Associated Press. All rights reserved

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Oil prices jumped more than 5% on Monday, April 3. The barrel of Brent, the world reference, goes for 84 dollars, that of American WTI is close to 80 dollars. A sharp rise after mid-March, Brent had fallen to its lowest level in two years. A decline that then suggested a respite on the inflation front.

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The explanation for this new outbreak is simple: several major producing countries have agreed on cuts in production. Algeria, Iraq, Saudi Arabia, the United Arab Emirates, Oman and Kuwait will reduce production from May until the end of the year. In total, a million barrels per day less will arrive on the market, Riyadh alone represents half of this decline.

A bigger cut

This new cut in global production is the largest since the one decided in October by OPEC +, a cut of 2 million barrels per day. And this is a new slap in the face for Washington because the United States called instead to increase oil extraction to try to limit inflation. Inflation is certainly slowing, but remains at high levels. However, at the same time, after its "zero-Covid" policy, China, the country most greedy in black gold, is reopening its economy, enough to create a call for air.

"Precaution" measure

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And it is this same inflation that would have led the oil giants to put the pedal soft. According to one analyst, oil demand remains threatened by inflation and recessionary pressures. Riyadh evokes a "precautionary measure aimed at supporting the stability of the oil market". Moscow also believes that these cuts are in the interest of the global market.

► READ ALSO: Russia further increases its oil deliveries to India

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• Petroleum
• Economic crisis
• Energies
• Trade and Commerce