The price of oil rose on Monday after a shock announcement by OPEC members that they will sharply cut production starting in May in an attempt to boost prices after the recent collapse, AFP reported.

In total, eight of the 23 members of OPEC+, which unites the Organization of the Petroleum Exporting Countries (OPEC) and its partners, decided to reduce their volumes by 1.16 million barrels per day, led by Saudi Arabia.

The announcement completely surprised the market, which had expected the status quo, as Saudi Arabia had “publicly and privately signaled” ahead of the meeting “that they have no intention of intervening at this time,” Eurasia Group analysts recalled.

“Usually they send out one or two trial balloons” before the meeting to test traders’ reactions, said Andrew Lebow of Commidity Research Group. “But this time it was a slap.”

The alliance took note of these “voluntary adjustments” to production on Monday after a long-planned technical meeting via video conference (JMMC). In unison with its members, it assured that this is a “precautionary measure to maintain the stability of the oil market.”

But for analysts, it’s mainly about getting “additional income,” commented Jorge Leon of Rystad Energy.

The cuts show OPEC will go to great lengths to “protect the price floor well above $80 a barrel,” he said, despite criticism from the United States and other consumer nations worried about rising inflation.

The banking crisis sent crude prices down in March to their lowest level in a year, “an unacceptable level for OPEC members,” Ibrahim al-Ghitani, a UAE oil market expert, told AFP.

“Real discounts”

After these concerted actions by major black gold producers, the markets’ reaction was immediate, with the two global benchmarks jumping around 8% in the early session, returning to pre-banking turmoil levels.

Brent crude from the North Sea, Europe’s main benchmark, for May delivery closed up 6.30% at $84.93.

West Texas Intermediate (WTI), the most popular U.S. crude also for May delivery, rose 6.27% to $80.42.

Thus, Iraq, Algeria, Saudi Arabia, the United Arab Emirates, Oman, Kazakhstan, Kuwait and Gabon will make major cuts from next month until the end of 2023. They range from 500,000 barrels per day (bpd) for Riyadh to 8,000 bpd for Riyadh. Libreville.

Moscow continued to cut by 500,000 bpd until the end of 2023.

In total, the amount remaining underground will be “about 1.66 million barrels per day,” OPEC said.

“Most of the cuts will be made by countries producing at or above their quotas, which means ‘real supply cuts’ and a tighter market,” DNB analysts said.

According to the Deputy Prime Minister for Energy Oleksandr Novak in an interview with the Russian TV channel “Russia 24”, other countries can also “announce their own reductions if they consider (…) necessary.”