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The Telegraph
The Telegraph
3 Apr 2023


saudi aramco oil production opec cuts oil prices
Saudi-led Opec cuts threaten more price rises Credit: AP Photo/Amr Nabil

Oil prices soared after oil producers’ unexpected cuts to crude output threatened to deliver a fresh jolt of inflation to the world’s markets.

West Texas Intermediate (WTI) soared as much as 8pc in early trading and stood above $79 per barrel at 7am, while Brent crude shot up almost 5pc to come close to $84.

Opec’s decision to cut production by more than 1m barrels per day surprised markets, with Saudi Arabia pledging to slash 500,000 daily barrels alone. Russia joined the oil cartel in pledging to reduce production as oil-rich countries sought to drive demand in a stuttering global economy.

Crude suffered its worst first-quarter drop since 2020 in the first part of this year, as traders weigh up China’s rebound against the threat of a banking crisis and strikes rocking France.

“Today’s move, like the October cut, can be read as another clear signal that Saudi Arabia and its Opec partners will seek to short circuit further macro selloffs,” RBC Capital Markets LLC analysts including Helima Croft said in note. “This decision will certainly not be welcomed by the White House.”

Higher oil prices present a renewed risk of inflation, analysts said, warning it would put further pressure on central banks such as the US Federal Reserve to raise rates. Economists had expected the Fed to hold rates at its meeting next month.

Gary Ross, a veteran oil consultant turned hedge fund manager at Black Gold Investors LLC, said Opec “is following through on being proactive and ahead of the curve, and is trying to rip oil prices from the grip of” macro sentiment”.

Good morning

Oil prices soared after oil producers’ unexpected cuts to crude output threatened to deliver a fresh jolt of inflation to the world’s markets.

West Texas Intermediate (WTI) soared as much as 8pc in early trading and stood above $79 per barrel at 7am, while Brent crude shot up almost 5pc to come close to $84.
 

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What happened overnight 

Oil prices jumped on Monday after Saudi Arabia and other OPEC+ oil producers announced a surprise round of output cuts, a potentially ominous sign for global inflation.

Brent oil futures spiked $5.16 to $85.05 a barrel on news output would be cut by around 1.16 million barrels per day, while US crude climbed $4.88 to $80.55.

Meanwhile, Hong Kong stocks opened slightly lower following a strong rally last week, as the big cut in oil output added to inflation concerns.

The Hang Seng Index shed 0.10pc to 20,379.50, but the Shanghai Composite Index added 0.14pc to 3,277.34 and the Shenzhen Composite Index on China's second exchange rose 0.11pc to 2,127.10.

Tokyo shares opened higher, with the benchmark Nikkei 225 index climbing 0.58pc to 28,203.35 at the open, and the broader Topix index rising 0.57pc to 2,015.01.