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Oil Prices Soar As Producers Unveil Shock Output Cut

touchaheart Nigeria reports that Monday saw a sharp rise in oil prices after major producers shocked the market with a surprise output cut of more than a million barrels. However, most stocks jumped when data revealed that US and European inflation continued to decline in November.

The agreement by the OPEC+ cartel, however, stoked worries about a further price increase that might force central banks to raise interest rates.

Following the biggest reduction since the group dropped two million barrels per day in October, Saudi Arabia, Iraq, the United Arab Emirates, Kuwait, Algeria, and Oman, both major crude contracts increased by almost six percent at one point.

In addition, despite American pleas for increased production, Russia decided to continue a production cut of 500,000 barrels per day.

The official Saudi News Agency reports that a representative of the Saudi energy ministry “emphasised that this is a precautionary move aimed at supporting the stability of the oil market.”

Over the past year, crude prices have decreased as anxieties about a potential recession brought on by increasing borrowing rates have outweighed supply concerns brought on by sanctions against Russia for its invasion of Ukraine.

The production decrease, which came at a time when global demand was uncertain, plainly demonstrates that OPEC was not pleased with the trend in the oil price, which had declined in recent months, according to Tapas Strickland of National Australia Bank.

Experts warned that the decision might send markets into a tailspin after they had recently surged on hopes that the ongoing instability in the banking sector would prompt the US Federal Reserve to terminate its rate-hike campaign earlier than anticipated.

According to markets, there will be no recession and reduced discount rates, which might be an unpleasant awakening for equities investors, according to Ronald Temple of Lazard Ltd.

Another reminder that the inflation genie is still loose is the OPEC+ production cut.

The news that price increases in the US and the eurozone had slowed down even further, however, had most Asian markets mirroring a robust gain on Wall Street.

The PCE Price Index, the Fed’s preferred inflation indicator, decreased from 5.3 percent in January to 5.0 percent in February.

In the meantime, prices in the eurozone increased 6.9 percent in March, exceeding expectations despite February’s 8.5 percent increase and a sharp decline in energy costs.

Hong Kong fell after last week’s surge, although Shanghai, Sydney, Singapore, Manila, and Jakarta all increased in early trade. Wellington and Seoul were also down.

Tokyo increased even though the closely-watched Tankan survey conducted by the Bank of Japan revealed that confidence among the biggest firms in the nation had dropped to its lowest point in more than two years.

US futures, meanwhile, fell as Treasury yields increased amid expectations that the Fed would continue to tighten monetary policy.

– Important data about 2:30 GMT

At $79.91 per barrel, West Texas Intermediate is up 5.6 percent.

At $84.26 a barrel, Brent North Sea crude is up 5.5 percent.

Tokyo’s Nikkei 225 closed at 28,149.89 up 0.4%. (break)

The Hong Kong Hang Seng Index fell by 0.3% to 20,348.41.

Shanghai Composite: Up 0.2% to 3,278.61.

Euro/dollar exchange rate: down at $1.0806 from $1.0846 on Friday.

Dollar/pound: down at $1.2297 from $1.2331

Euro to pound: down from 87.93 pence to 87.87 pence

The dollar has increased to 133.02 yen from 132.82 yen.

Dow: 33,274.15 in New York, up 1.3 percent (close)