Business & EconomyConsumers brace yourself: Oil price surges with surprise production cuts

Consumers brace yourself: Oil price surges with surprise production cuts

With OPEC producers talking about production on the way, rising oil prices follow and inflation grows stronger. Either which way consumers go, they’ll bear the brunt of it all.

Brent crude, the global benchmark, jumped 4.8% to $83.73 a barrel, while WTI, the US benchmark, rose 4.9% to $79.36.

On Sunday, Saudi Arabia announced that it would start “a voluntary reduction” in its production of crude oil, alongside other members or allies of the Organization of the Petroleum Exporting Countries (OPEC).

Oil Price: No Cuts

In October last year, oil producers agreed to rip output by 2 million barrels daily, equivalent to about 2% of global oil demand, the largest cut since the start of the pandemic.

Saudi Arabia now says it will cut oil production by another half a million barrels a day and this will result in further oil price hike.

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Meanwhile, Iraq will slash production by 200,000 barrels per day, and the United Arab Emirates will decrease output by 144,000 barrels per day and more countries started to slash production, including Russia, a member of OPEC+.

Unexpected move

Analysts said the move was unpredicted but “consistent with the new OPEC+ doctrine to act pre-emptively because they can without significant losses in market share.”

In October, OPEC+’s decision to cut production had already festered the White House.

US President Joe Biden pledged at the time that Saudi Arabia would suffer “consequences.” But so far, his administration appears to have backed off on its vows to punish the Middle East kingdom.

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NOTE: Photo above is from Pexels

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