Oil rallied 8% on Monday, signaling its largest price increase over the past year. This came after the Organization of Petroleum Exporting Countries and its allies, including Russia, made an unexpected production cut.
In a move that surprised markets, members of OPEC+ pledged to cut oil production by 1 million barrels per day starting next month. Markets expected the organization to hold output steady, particularly as it comes outside of OPEC+’s regular timetable to review the market’s demand and members’ supplies.
Following the announcement, Goldman Sachs Group Inc. lifted its forecasts for this year and the next while U.S. gasoline futures also surged. In what would typically be a quiet Asian trading session, thousands of futures were purchased.
Peter McNally, global sector lead for energy at Third Bridge, said that “by cutting now, OPEC+ moves to rebalance the market in front of the strongest seasonal period.”
The White House, on the other hand, disagreed with OPEC+’s decision, labeling it as ill-advised. The U.S. government added that it would work with producers and consumers to suppress the rise in gasoline prices.