Oil Prices Surge on OPEC’s Surprising Production Cut

Oil prices moved sharply higher on Monday after OPEC+, consisting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, announced on Sunday it will slash output by 1.16 million barrels per day (mpd).

“The selected involvement of the largest OPEC+ members suggest that adherence to production cuts may be stronger than has been the case in the past,” Commonwealth Bank of Australia’s Vivek Dhar said in a note.

The voluntary cuts will start next month and will last until at least the end of this year. Saudi Arabia, the biggest oil producer in the world, said in a separate press release that it will cut its output by 500,000 mpd.

“The Ministry of Energy official emphasized that this is a precautionary measure aimed at supporting the stability of the oil market.”

This move from OPEC+ comes after Russia said it will cut its production by 500,000 barrels per day. Moreover, UAE said it will reduce its production by 144,000 barrels per day.

Some commodity analysts now see a chance for oil prices to soar to $100 a barrel on tighter supply. The OPEC+ decision also signals the strong intention to defend low market prices after crude oil hit levels below $65 in March.

The ongoing surge in oil prices is playing into the hands of several Congress members who were buying oil stocks in recent months. Most notably, Rep. Michael McCaul invested at least $200,000 in ConocoPhillips (COP:US) in February. His trades came after Mr. McCaul sold shares of Chevron (CVX:US) in December last year.

Similarly, Congress members Shelley Moore Capito and Josh Gottheimer were buying shares of CVX and COP in February and January, respectively.