OPEC+’s shock output cuts is admission bullish oil demand view is uncertain: Russell

OPEC+’s shock output cuts is admission bullish oil demand view is uncertain: Russell

(The opinions expressed here are those of the author, a columnist for Reuters.)

LAUNCESTON, Australia - The surprise decision by Saudi Arabia and other OPEC+ producers to cut crude oil output from May will likely achieve two things; a short-term boost to prices and a longer-term reassessment of bullish demand forecasts.

The OPEC+ group, which consists of the Organization of the Petroleum Exporting Countries and allies including Russia, said on Sunday they would reduce production by a further 1.16 million barrels per day (bpd) from next month.

This brings the total pledged output cuts by the group to around 3.66 million bpd, around 3.7% of global demand, and these are expected to remain in place until the end of the year.

Saudi Arabia, the world's leading oil exporter, said the additional reduction is precautionary and aimed at achieving stability in the global oil market.

The current Saudi definition of stability would appear to be a price somewhere above $80 a barrel, and it's likely that the rationale behind the unexpected cuts was to lift prices and keep them at a higher base.

If that was the thinking, it certainly worked, at least for now. Global benchmark Brent futures jumped at the open in Asia on Monday,