Oil market surges on shock output cuts

World oil prices soared Monday after several top producers led by Saudi Arabia sprang surprise output cuts despite already angering the United States with a similar move last year.

Crude futures surged almost eight per cent at one stage, a day after multiple members of the OPEC+ exporters’ alliance unexpectedly slashed production by a total of more than one million barrels per day.

The shock reduction will start in May and last until the end of the year, with OPEC+ saying Monday it involves Algeria, Gabon, Iraq, Kazakhstan, Kuwait, Oman, Saudi Arabia and the United Arab Emirates.

It came on top of a decision from Russia -- also an OPEC+ member -- to extend a cut of 500,000 barrels per day. The oil cartel had already angered Washington in October by slashing production by two million barrels per day.

At the time, the White House accused OPEC+ of “aligning with Russia”, saying the cuts would boost Moscow’s revenue and undermine Western sanctions imposed over its invasion of Ukraine.

Russia’s war on Ukraine sent energy prices soaring last year, fuelling high inflation across the world, but crude prices have fallen since then.

OPEC+ said in a statement on Monday that Sunday’s move was a “precautionary measure aimed at supporting the stability of the oil market”.

The Kremlin also defended the decision, saying it was “in the interests of global energy markets for world oil prices to remain at a good level”.

“Whether other countries are happy with this or not is their business,” Kremlin spokesman Dmitry Peskov told reporters. The news sparked bumper gains for energy companies and lifted London and Paris stock markets, although Frankfurt dipped. On Wall Street, shares mostly picked up too.