Oil prices expected to rise above $100 a barrel due production cuts by OPEC
OPEC+’s surprise production cuts could push oil prices towards $100 per barrel, tighten the market, and encourage diversification of supplies, according to analysts and traders. Oil prices jumped over $4 per barrel on Monday after OPEC+ announced further production cuts of about 1.16 million barrels per day from May to the end of the year. The cuts will add to the tightness in the oil market and may lift prices above $100 per barrel for the rest of the year, according to Rystad Energy. UBS also expects Brent to reach $100 by June, while Goldman Sachs raised its December forecast by $5 to $95.
Goldman said strategic petroleum reserve releases in the US and in France, due to ongoing strikes, as well as Washington’s refusal to refill its SPR in the 2023 fiscal year, may have prompted the OPEC+ action.
An official at a South Korean refiner said the cut was “bad news” for oil buyers and OPEC was seeking to “protect their profit” against concerns of a global economic slowdown.
The supply cut would drive up prices just as weakening economies depress fuel demand and prices, squeezing refiners’ profits, the South Korean refining official and a Chinese trader said.
Both declined to be identified as they were not authorized to speak to media.
Saudi Arabia said its voluntary output cut was a precautionary measure aimed at supporting market stability.
Purchases by China, the world’s top crude importer, are expected to hit a record in 2023 as it recovers from the COVID-19 pandemic, while consumption from No.3 importer India remains robust, traders said.