OPEC+ surprises oil market by announcing cuts will more than double
After the Organization of the Petroleum Exporting Countries' (OPEC+) surprising decision to limit oil output, threatening to tighten the market and send a new inflationary jolt to the global economy, oil prices surged to their highest levels in more than a year, leading energy analyst Eric Nuttall to predict that oil prices might trade over US$100 per barrel by the end of 2023.
“The importance of yesterday's OPEC cut cannot be overstated,” Nuttall, partner and senior portfolio manager at Ninepoint Partners, said in an email to BNN Bloomberg.
The decision quickly spread throughout the world's oil markets. Crude had just ended a quarterly decline of 5.7% amid upheaval in the banking sector and recessionary threats before the unexpected intervention.
Since the OPEC+ statement on Sunday, the price of crude has increased 8% to US$80.06 per barrel. The decrease, according to the committee, is a "precautionary measure aimed at maintaining the stability of the oil market."
Nuttall noted that although global stockpiles were already on track to end this year at an eight-year low, further production cutbacks now have the potential to more than double the rate of oil withdrawals, driving up the price of the commodity above what market players had projected.
Though the decision to cut by OPEC+ took the market by surprise, Nuttall said that this gutsy effort should be enough to allow the market to now turn its attention to the problem of massive stock draws and oil supply issues.
“We think oil will trade to over US$100 (per barrel) by the end of the year,” Nuttall said. “We remain bullish.”
