The West Texas Intermediate (WTI) for May delivery rose 4.75 U.S. dollars, or 6.28 percent, to settle at 80.42 dollars a barrel on the New York Mercantile Exchange. Brent crude for June delivery increased 5.04 dollars, or 6.31 percent, to close at 84.93 dollars a barrel on the London ICE Futures Exchange.
The rally marked the biggest daily gain for WTI since April 12, 2022, and the best daily performance for Brent since March 21, 2022, according to Dow Jones Market Data.
Members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, on Sunday unexpectedly announced crude output cuts of more than 1 million barrels per day (bpd) from May until the end of 2023.
Saudi Arabia will lead with a voluntary cut of 500,000 bpd, while Iraq, the United Arab Emirates, Kuwait, Algeria, Oman, Kazakhstan, and Gabon will also participate in the cuts. Meanwhile, Russia said it would extend a voluntary cut of 500,000 bpd until the end of the year.
Accordingly, this will bring the total additional voluntary production adjustments by the above-mentioned countries to 1.66 million bpd, OPEC said in a statement on Monday.
The move "is a precautionary measure aimed at supporting the stability of the oil market," said the statement.
The reductions are on top of the 2 million barrel-production cut announced by OPEC+ last October.
Goldman Sachs increased its forecasts for oil prices following the cuts, projecting in an analyst note that Brent could hit 95 dollars a barrel by December 2023, compared with a prior estimate of 90 dollars a barrel.
The bank also raised its Brent crude forecast for 2024, now seeing it at 100 dollars a barrel at the end of the year from an earlier projection of 97 dollars.
Analysts at UBS also hold a positive price outlook for oil, noting that "fundamentals support a tightening of the oil market."
"We continue to rate oil as most preferred in our global strategy, as part of our positive outlook for commodities overall," they said in a note on Monday.
In March, oil prices came under pressure as banking turbulence in the United States and Europe stoked recession fears.
Latest comments