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Crude prices dropped sharply last month, driven by the turmoil in the banking sector. That hurt the budgets of countries like Saudi Arabia, which rely on oil revenue. And cutting production was a reliable way to bring prices back up.
April 3, 20236:30 PM ET
Brent prices, the global benchmark, jumped up around $5 to around $85 a barrel immediately on news of the cuts. Reducing oil production means less supply on the market, which obviously pushes prices higher.
Because the cuts are planned to last from May through the end of the year, the effect on oil prices is also expected to be prolonged.
Saudi Arabia and a handful of other countries stunned the world on Sunday by announcing significant cuts in their oil production – totaling more than a million barrels of oil per day – starting in May.
The decision was unexpected because it did not come as a typical, negotiated OPEC+ agreement reached at a regularly scheduled meeting. Instead it was undertaken by Saudi Arabia and other producers including the United Arab Emirates and Iraq, and announced without warning.