The Organization of Petroleum Exporting Countries (OPEC) and other major oil producing countries, known as OPEC+ held a joint meeting on Sunday 2 April, 2023 to announce an unexpected further reduction in production of oil to 1.16 million barrels per unit .Hence, the total production cut has reached to 3.16 million barrels per unit. Known as the De Facto leader of this group Kingdom of Saudi Arabia contributed to the largest extent of 0.5 million barrel per day (mbpd) (43%) followed by Iraq & United Arab Emirates contributing 0.211 mbpd (18%) & 0.144 mbpd (12.4%).
It’s a common belief of Oil market traders that OPEC member countries play a considerable role in price setting of Crude & they might not prefer Brent Oil below $80 per barrel. Moreover, it is possible that this production cut may allow oil quotes to return to the price of $ 100 per barrel. Hence, any hopes for low oil prices this year seem far from being realized.
A possible reason for the surprise production cut by OPEC+ is widely being translated to bring a stability in markets however US National Security Council and US President Joe Biden seem unhappy over this production cut by the OPEC+ as they are in a continuous struggle to bring down gasoline prices since last year 2022 after the Russian invasion of Ukraine.
U.S. dollar rose strongly in the early Asian trade on Monday April 4 as surging oil prices raised inflation concerns, which could prompt the U.S. Federal Reserve bank to escalate interest rates at its third meeting this year scheduled at May 3. FED has already adopted a very aggressive path towards monetary policy contraction & has delivered 475 basis points hike from 2022 till 2023. This has been the most aggressive policy stance by FED since year 2007.