Oil prices are up 8% after OPEC+ announced that it is cutting its production output by 1.16 million barrels per day.
The price of West Texas Intermediate (WTI) crude oil, the U.S. standard, has increased 5.17% to $79.59 U.S. per barrel.
At the same time, the price of Brent crude oil, the global benchmark, has gained 5.07% to trade at $83.95 U.S. a barrel.
The production cuts among OPEC+ members will begin in May and run to the end of this year, according to a statement by Saudi Arabia.
The Saudi government said the production cut is a “precautionary measure” aimed at stabilizing the global oil market.
The move by OPEC+ comes shortly after Russia decided to trim its oil production by 500,000 barrels per day through year’s end.
In addition to Saudi Arabia’s output cut of 500,000 barrels per day, other member states have also promised to curtail production, including the United Arab Emirates (UAE), Kuwait, Oman, Iraq, Algeria, and Kazakhstan.
In notes to clients, several Wall Street analysts said that the production cut by OPEC+ could push oil prices toward the $100 U.S. mark.
This past March, oil prices tumbled to their lowest level since December 2021, falling below $65 U.S. per barrel as traders’ fears of a global recession grew in the wake of the banking crisis.
The latest production cut follows one announced last October when the oil cartel lowered its output by two million barrels per day.
The administration of U.S. President Joe Biden has expressed disappointment at the production cuts announced by OPEC+ in the past, calling them “short sighted decisions” given the ongoing war in Ukraine and with inflation elevated around the world.
Some analysts said that the surprise cut shows the oil cartel is trying to avoid a repeat of the 2008 oil crash, and that the latest move is consistent with the OPEC+ doctrine of acting pre-emptively on price actions.