OPEC+ move comes amid ongoing woes over global economic recession and possibility of further US Fed interest rate hikes, all of which could negatively impact oil demand
ANKARA
Oil prices slightly declined during the week ending April 7, as investors evaluated the implications of OPEC+’s recent surprise move by agreeing on output cuts totaling 3.6 million barrels per day (bpd).
Brent crude closed on Thursday at $84.99 per barrel, posting a 1.17% loss from the Monday session that opened at $86 a barrel. The stock market closed for trade today, Good Friday, ahead of the Easter Sunday holiday.
The American benchmark West Texas Intermediate (WTI) registered at $80.61 per barrel at the same time on Thursday, decreasing 0.63% relative to the opening price of $80.10 a barrel on Monday.
Both benchmarks posted limited losses on the back of the lingering economic recession and oil demand fears fueled by the US banking system’s financial crisis. OPEC+ decision to axe the production as of May supported the upward movements.
OPEC+ reaffirmed their plan during their 48th Joint Ministerial Monitoring Committee (JMMC) on Monday to maintain oil output cuts of 2 million barrels per day (bpd) until the end of the year, with extra voluntary production cuts of around 1.66 million bpd beginning in May.
Saudi Arabia led the way with 500,000 barrels per day of cuts, followed by Iraq with 211,000 bpd the UAE with 144,000 bpd, Kuwait with 128,000 bpd, Kazakhstan with 78,000 bpd, Algeria with 48,000 bpd, Oman with 40,000 bpd, and Gabon with 8,000 bpd.
Russia also declared that existing production cuts of 500,000 bpd would be extended until the end of the year.
Some experts expressed concern that the production cuts would push Brent oil prices up to $110 per barrel, while others concurred that the recent output decision aims to keep prices at around $80 per barrel.
Lingering demand fears
The OPEC+ decision came amid global economic woes and the possibility of further US Fed interest rate hikes, all of which could have a negative impact on oil demand.
The US Fed made a total of 425-point interest rate increases on seven occasions last year to fight record-high inflation that climbed to its highest level in over 40 years by mid-2022.
It later made a rate increase of 25 basis points on Feb. 1, followed by another hike of 25 basis points on March 22 that carried its benchmark funds rate to a range of 4.75% to 5%.
On Thursday, US Federal Reserve Bank of St. Louis President James Bullard said inflation expectations are lower now, in part due to the Fed’s front-loaded monetary policy last year.
The St. Louis Fed president also talked about the recent banking turmoil in the US, and said regulatory authorities are ready to take additional action as necessary.
Iraqi oil exports resume
Prices have been subject to upward pressure last week after Iraq halted crude exports from the Kurdish Regional Government’s (KRG) northern Kirkuk fields on March 25 after it won an arbitration case against Türkiye.
On Tuesday, the KRG announced that oil exports through Türkiye’s Ceyhan pipeline would resume later in the day.
