Crude Surges On OPEC+ Output Cut News, But Off Intraday Highs

Oil prices have jumped during APAC trading today following OPEC’s surprise announcement on Sunday that it will cut output by 1.1mbd from May following October’s 2mbd reduction. Prices are off their peaks but are still up over 5.5%. WTI is around $79.67/bbl and Brent $84.00 following intraday highs of $81.69 and $86.44 respectively. The USD index is 0.5% higher.

• Today’s rally has seen Brent break through both the 50- and 100-day simple moving averages and it is now heading towards the 200-day at $84.77.
• Saudi Arabia will account for 500kbd of the output reduction with UAE, Kuwait and Algeria making up the rest. Russia also announced that its production cuts will be extended to year end from June. Goldman Sachs has increased its forecast for end-2023 Brent to $95 and end-2024 to $100. There is a chance now that Q2 will post a deficit when a crude surplus had been expected.
• The announcement is likely to weigh on already strained US-Saudi relations and make it harder for central banks to bring inflation down.
• Later today March manufacturing PMIs print in the US and Europe and the US ISM is also released.