Oil rebounds as OPEC+ output cuts trigger fears of weaker global economic growth

Oil prices rallied on Monday after some OPEC+ countries cut production by more than 1 million barrels per day (bpd) in an already tight market, raising concerns about further interest rate hikes and weaker economic growth.

International benchmark Brent crude traded at $84.08 per barrel at 9.35 a.m. local time (0635 GMT), a 5.24% increase from the closing price of $79.89 a barrel in the previous trading session.

At the same time, American benchmark West Texas Intermediate (WTI) traded at $79.68 per barrel, a 5.29% rise after the previous session closed at $75.67 a barrel.

Both benchmarks rose around 5% after the OPEC+ group’s major oil producers announced a 1.65 million bpd cut in monthly production until the end of the year over the weekend.

Saudi Arabia led the way with 500,000 bpd of cuts, followed by the UAE with 144,000 bpd, Kuwait with 128,000 bpd, Iraq with 211,000 bpd, Oman with 40,000 bpd, Algeria with 48,000 bpd, and Kazakhstan with 78,000 bpd.

Russia also announced that it would extend the existing 500,000 bpd of output cuts until the end of 2023.

Russian Deputy Prime Minister Alexander Novak said on Sunday that the global oil market is living through a period of high volatility and unpredictability due to the continuing banking crisis in the US and Europe, the global economic uncertainty, and unpredictable and short-sighted energy policy decisions.

‘Predictability on the global oil market is a key element of energy security,’ he stressed.

Meanwhile, a spokesperson for the US National Security Council (NSC) on Sunday described the OPEC+ production cut decision as not ‘advisable.’

‘We will continue to work with all producers and consumers to ensure energy markets support economic growth and lower prices for American consumers,’ the NSC spokesperson said.

Limiting further price increases, uncertainties over the US banking system are still looming, as the country is set to bring in new measures to bolster the financial system in the long term.

• American Benchmark West Texas Intermediate (WTI)