Oil prices surged above $85 at the start of the week, boosted by the announcement by major producers that they would cut supply more than they had planned to stabilize prices destabilized by fears of a recession.
In morning trading, the value of oil was steady at that level. On the London market, a barrel is trading for $85.65, while oil on the American market is $81.19, according to data published on the OilPrice website.
The Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+, worried investors by announcing that they will cut production by an additional 1.16 million barrels per day from May to December, in addition to the previous reduction of two million barrels per day that will last until November.
According to Reuters’ calculations, this would reduce their production by 3.66 million barrels per day, which is 3.7 percent of global demand.
US President Joe Biden’s office stated that the group should not make such a move now.
The price of a barrel in London fell towards $70 in March as investors feared that the global banking crisis and rising interest rates would hit demand and neutralize the impact of reduced OPEC production.
Analysts believe that it was precisely the problems in the banking sector that prompted OPEC+ to re-align production.
According to Bjarne Schieldrop from SEB Group, OPEC+ can and wants to prevent certain events.
Ready measures
Bjarne said that the recent market turmoil and the drop in the price of $70 a barrel probably scared them. He adds that such a thing will not be tolerated, speculating that the group was probably concerned by the rise in interest rates in Western countries and the situation in the global banking system.
The decision signals that OPEC+ is ready to take measures to remove the threat posed by possible economic problems, says Jorge Leon of Rystad Energy.
On Friday, OPEC announced that a barrel of its members’ oil basket cost $78.12.
