HONG KONG: When major producers, led by Saudi Arabia, unexpectedly announced a drop of more than one million barrels per day, oil prices surged by about 6% in Asian trade on Monday morning.
Although Brent increased by 5.67% to $84.42, the West Texas Intermediate contract increased by 5.74% to $80.01 per barrel.
The OPEC+ cartel cut its daily output by two million barrels in October, and the Saudi Arabian, Iraqi, UAE, Kuwait, Algeria, and Oman decision will be in effect from the beginning of next month until the end of the year.
Despite US efforts to raise output, the fall came when Russia decided to continue a cut of 500,000 barrels per day.
The announcement will fuel further inflationary concerns and increase pressure on central banks to raise interest rates even higher.
According to Matt Simpson at City Index, market sentiment “is likely to take a hit… as greater levels of projected inflation entail higher (for longer) interest rates.”
And stocks won’t likely like this development, so the week may get off to a difficult start.
