Oil prices surged by 8% after the Organization of Petroleum Exporting Countries and its allies (OPEC+) announced production cuts totaling 1.16 million barrels per day, starting from May until end-2023. The move was prompted by the West's imposition of price caps on Russian oil and oil products, which led to Saudi Arabia unexpectedly announcing crude output cuts, threatening inflation in global markets. Brent crude futures jumped by 5.07% to $83.95 a barrel on the news while US West Texas Intermediate crude futures soared by 5.17%. Analysts warn that China's reopening and Russia's output cuts could push oil prices toward the $100 mark again.
The voluntary production cut will see other member states also pledging respective reductions as they seek to drive demand in a stuttering global economy.
"Higher oil prices present a renewed risk of inflation, warning it would put further pressure on central banks such as the US Federal Reserve to raise rates," warned an analyst with CMC Markets.
Last year's production cut aimed at shoring up oil prices was deemed insignificant due to oversupply concerns triggered by COVID-19 lockdowns' impact on demand for fuel.
However, some analysts believe this latest cut is set to deliver a more significant impact than last year's reduction as it seeks to avoid repeating what happened in 2008 when plummeting demand caused severe crashes across several economies.
On Monday, US equities traded flat following OPEC+'s shock announcement while Brent crude futures were up by 5.3%, trading at around $79.80 per barrel alongside shares of Chevron and Exxon Mobil, Apellis Pharmaceuticals Inc., World Wrestling Entertainment Inc., among others.
Additionally, shares of casino operators listed in Macau surged ahead of data showing that gaming revenue had increased significantly over March despite COVID-19 restrictions still in place. However, Morgan Stanley released a statement saying there shouldn't be any near-term impact on the economy due to high interest rates.