Brent surges after OPEC+ output cut extension

The front-month ICE Brent contract gained $1.60/bbl on the day from Friday, to trade at $83.78/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent’s price got a boost after the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced the extension of a voluntary output cut of 2.2 million b/d into the second quarter of this year.

OPEC’s de-facto leader Saudi Arabia announced a voluntary cut of 1 million b/d, followed by Iraq (220,000 b/d), the UAE (163,000 b/d), Kuwait (135,000 b/d), Kazakhstan (82,000 b/d), Algeria (51,000 b/d) and Oman (42,000 b/d) through the end of June.

Russia, the leading producer of OPEC+, will continue oil production and export cuts by an additional 471,000 b/d in the second quarter, its Deputy Prime Minister Alexander Novak said on Sunday.

This announcement will support Brent’s price gains as “signs of tightness in the physical market continue to push crude oil higher,” ANZ Bank’s senior commodity strategist Daniel Hynes said. “Output cuts by the OPEC+ alliance continue to reduce supply as the market worries about the renewed tensions in the Middle East,” he added.

Meanwhile, in a clear escalation of the Middle Eastern conflict, Iran-backed Houthis vowed on Sunday that the group will continue targeting US- and UK-operated ships transiting the Gulf of Aden, following the sinking of UK-owned cargo vessel M/V RUBYMAR.

"Yemen will continue to sink more British ships, and any repercussions or other damages will be added to Britain's bill," Hussein al-Ezzi, a senior member of the Houthi group said in a post on X (formerly Twitter).

Downward pressure:

Meanwhile, mixed projections for world oil demand growth have put some downward pressure on Brent futures.

Last week, the US Energy Information Administration’s (EIA) weekly oil inventory report showed a big build in US crude stockpiles, indicating a lackluster demand growth in the country.

Commercial crude oil inventories in the US surged by 4 million bbls to reach 447.16 million bbls on 23 February, according to the EIA.

By Aparupa Mazumder

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