OPEC’s surprise output cut boosts U.S. oil futures by more than 6% amid fears of a sharp decline in the global oil supply.
A surprise cut in oil prices by the OPEC organization boosted oil futures to higher levels amid increasing fears of increasing inflation. Over the past few weeks, market uncertainty has increased significantly at a time when public trust in the financial system has declined.
On Sunday this week, the oil cartel members announced that they will cut their daily oil production by another 1.1 million barrels. The decision was made as a result of rising economic and banking tensions.
On top of that, the U.S. leaders are facing other critical issues, including the union that Russia, China, India, and Brazil are conducting. Five nations have agreed to use their currencies and the Chinese yuan in their future transition with Russia. The decision was surprising and confusing to the U.S. and especially to the U.S. dollar’s position against other currencies. This move is expected to affect the dollar’s position in the market and weaken it in the long run.
By Monday, 12:40 ET, the U.S. dollar had declined by 0.4% to its current level of 101.3. Moving to oil futures, the West Texas Intermediate futures were up by 6.3% to a market price of $80.7 per barrel. Brent crude oil jumped by 6.06% to trade at a market price of $84.73 per barrel.
As for gold, the yellow metal surpassed the $2000 per ounce level for the first time since March 2022. The increasing tension and the recent banking crisis boosted gold’s growth potential, and over the past 2 months, gold jumped from $1700 to $2000 per ounce.
In today’s trading session, gold jumped by 1.06% to $2007.6 per ounce.
The U.S. and European oil demand have weakened since the start of the year, yet the increase in Chinese oil demand has troubled the market. And with this stunt, global supply and demand will weaken even more, especially when Russia is pulling the strings now.
Goldman Sachs released its oil prices for the end of the year based on today’s announcement. Goldman changed its previous expectation of $90 per barrel by the end of December 2023 to $95.
Meanwhile, in Europe, the core inflation rate shows that the future just hit a new record amid fears of higher increases in the next few months. Yet, in the U.S., inflation is showing signs of slowing, which encourages the Federal Reserve to keep raising its key interest rates by small hikes.
In light of recent events, investors hope for a pause in interest hikes, at least for Miai, this year’s second interest hike meeting.
Rumors and several reports also say that U.S. authorities are investigating the Swiss bank merger’s details and why the bank agreed to the terms.
Moving to the U.S. stock market, the S&P 500 benchmark was down by 0.03% to 4,107.48 basis points. The Nasdaq composite fell by 0.91% to 12,111.60 basis points, while the Dow futures jumped by 0.68% to 33,502.6 basis points.