Oil prices soar Monday as producers unveil shock output cut

Oil prices soared Monday after top producers unveiled a shock output cut of more than a million barrels per day, while equities mostly rose after data showed US and European inflation eased further last month. However, the decision by the OPEC+ cartel fanned concerns about a fresh spike in prices that could put pressure on […]

Oil prices soared Monday after top producers unveiled a shock output cut of more than a million barrels per day, while equities mostly rose after data showed US and European inflation eased further last month.

However, the decision by the OPEC+ cartel fanned concerns about a fresh spike in prices that could put pressure on central banks to push interest rates higher.

Both main crude contracts jumped around eight per cent at one point following the cut by Saudi Arabia, Iraq, the United Arab Emirates, Kuwait, Algeria and Oman, which was the biggest since the group slashed two million barrels per day in October.

It came on top of a Russian decision to extend a cut of 500,000 barrels per day, and in spite of US calls to increase production.

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A Saudi energy ministry official “emphasised that this is a precautionary measure aimed at supporting the stability of the oil market”, according to the official Saudi Press Agency.

Crude prices have come down over the past year as concerns about a possible recession caused by higher borrowing costs have offset supply worries sparked by sanctions on Russia over its invasion of Ukraine.

“The production cut, coming at a time of an uncertain global demand environment clearly shows OPEC was not happy with the movement in the oil price which had fallen over recent months,” said National Australia Bank’s Tapas Strickland.