Oil prices experienced a sharp surge during early morning trading after Saudi Arabia and other major oil producers announced an unexpected cut in production. The price of Brent crude oil was trading above $84 a barrel, having jumped by more than $4 or 5 per cent, leaving analysts predicting that higher oil prices would fill Russian President Vladimir Putin's coffers while forcing Americans and others to pay even more at the pump.
The cuts are equivalent to less than 5% of the country's average production of 11.5 million barrels per day in 2022; however, they represent a significant shift for the OPEC+ cartel. Unusually announced outside of a formal meeting, the move was partly motivated by US Energy Secretary Jennifer Granholm's recent statement that it would take years to refill the US Strategic Petroleum Reserve (SPR).
The Biden administration expressed its belief that such cuts were not "advisable," according to a spokesperson for the UN National Security Council who spoke with Reuters. The decision is likely to further strain ties between Saudi Arabia and China amid ongoing tensions with the Middle Eastern nation.
Analysts believe that these cuts will add tightness in the market and lift prices above $100 a barrel for this year, possibly taking Brent as high as $110 this summer. With prices soaring already on Monday morning following OPEC+'s announcement, many are left wondering what impact this will have on global economies.
In response to these events, Twitter CEO Elon Musk took notice and responded via his social media platform; however, it remains unclear what his thoughts are regarding these developments moving forward.