Oil leaps $5/bbl OPEC+ surprises markets by cutting output target

Shafaq News / Oil prices jumped by more than 6% on Monday, headed for its biggest daily rise in nearly a year after OPEC+ jolted markets with plans to cut more production.

Brent crude was up $4.91, or 6.2%, at $84.80 a barrel by 1 p.m. EDT (1700 GMT) after touching its highest since March 7 at $86.44. West Texas Intermediate crude U.S. was up $4.83, or 6.4%, at $80.50 a barrel, after hitting its highest since late January.

The Organization of the Petroleum Exporting Countries and allies including Russia, a group collectively known as OPEC+, shook markets with Sunday's announcement that it is cutting its production target by a further 1.16 million barrels per day (bpd).

The group had been expected at its monthly meeting on Monday to stick with its previous decision to target output cuts of 2 million bpd until December.

The latest pledges bring the total volume of cuts by OPEC+ to 3.66 million bpd, according to Reuters calculations, equating to 3.7% of global demand.

"The Sunday production cut was on no one's radar... With U.S. oil producers focused on capital discipline, OPEC+ remains in control of the oil market," UBS analyst Giovanni Staunovo said.

U.S. President Joe Biden's administration said it was given a "heads up" on the move and told Saudi officials that it disagreed with it.

Meanwhile, some analysts pointed to a weakening economy and rising stockpiles as a rationale for the cuts.

U.S. manufacturing activity slumped to the lowest level in nearly three years in March as new orders plunged. Activity could decline further as interest rate hikes have pushed borrowing costs higher, cooling demand for goods.

(Reuters)