News wire — Brent oil prices could still end the year at $96 per barrel, J.P. Morgan analysts said, adding they view the surprise OPEC supply target cuts as a “preemptive measure” to assure that surpluses in the market do not extend into the second half of 2023.
Saudi Arabia and other Organization of the Petroleum Exporting Countries announced further oil output cuts of around 1.16 million barrels per day, in a surprise move that analysts said would cause an immediate rise in prices and which the United States called “inadvisable”.
Oil prices surged on Monday, jolted by the surprise announcement.
Brent crude were trading around $84.26 a barrel by 0347 GMT, up 5.5% after touching the highest in a month at $86.44.
The pledge brings the total volume of cuts by OPEC+ to 3.66 million bpd according to Reuters calculations, equal to 3.7% of global demand.
Sunday’s development comes a day before a virtual meeting of an OPEC+ ministerial panel, which includes Saudi Arabia and Russia, and which had been expected to stick the existing output plan.
J.P. Morgan further noted it had earlier assumed both the Biden administration and the producer group to act in the first quarter.
“The most surprising part of the announcement is that it was not made sooner,” J.P. Morgan analysts said in a note dated April 2, adding, “acting later diminishes the impact on overall balances and hence it takes longer for the price impact to take hold.”
Earlier Goldman Sachs raised its Brent price forecast for December 2023 by $5 to $95 a barrel, and that for December 2024 by $3 to $100 per barrel.
(Reporting by Arundhati Sarkar in Bengaluru; editing by Jason Neely) – Reuters
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