Oil Prices Jumped After Surprise Move To Cut Production

Oil prices increased on Monday when several world’s largest exporters announced a surprise cut in production. Now Brent crude oil is trading at $85 a barrel after jumping straight 6%. Some economists anticipated that the higher price would make it harder to cut the cost. But the RAC motoring group stated that the rise in oil prices did not mean that it would impact petrol prices unless the higher oil price is sustained over several years. 

The reason behind increasing the prices is cutting down the oil output by more than one billion per day. The countries that declared the reduction in production on Sunday are Saudi Arabia, Iraq and several other Gulf States. In addition to these countries, Russia also declared to cut the oil production to half a million barrels per day until the end of this year. Oil prices have been continuously seeing ups and down since Russia invaded Ukraine.

“We don’t think the production cuts are advisable at this moment, given the market uncertainty. And we made that clear,” said John F. Kirby, a spokesman for the National Security Council. “But we also don’t have a seat at that table.” 

Last year, the US president made a unique appeal to the Saudi Crown Prince bin Salman in Riyadh to increase oil production. 

A statement released by OPEC, the Organisation of the Petroleum Exporting Countries, on Monday described the “voluntary production adjustments” as a “precautionary measure aimed at supporting the stability of the oil market.”

Saudi Arabia, the top oil producer, said it would cut by 500,000 barrels a day, followed by Iraq, which will cut 211,000 barrels, the United Arab Emirates announced to reduce 144 000 barrels, and five other countries. 

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