Oil prices jump on the back of OPEC production cuts. Exxon, Chevron stock soaring.

The sudden increase in prices led to a rise in oil stocks. Exxon Mobil (stock ticker: XOM) rose 4.3% in the primary market to $114.28, and Chevron (CVX) rose 4.4% to $170.21. BP (BP) f coincidence (Shell) They both jumped about 5%.

Occidental Petroleum (OXY), the oil producer that billionaire investor Warren Buffett owns, added Berkshire Hathaway (BRK.B) 23.5%, 6.3%.

The jump in oil prices meant that Crude Oil has now almost recovered its losses since January 1st. Concerns about energy demand after a year of high interest rates, when supplies were plentiful even after Russia invaded Ukraine, have sent prices down more than 20% since this time last year. Prices fell further in mid-March as turmoil among banks added to the uncertainty over the outlook for the economy.

This is the background to the OPEC announcement, which came unexpectedly in between the group’s regular meetings. Led by Saudi Arabia, OPEC is voluntarily planning to cut production by about 1.1 million barrels per day. This comes on top of cuts announced last October.

The move also reflects heightened geopolitical tensions, said Tom Holland of Gavekal Research. The United States has repeatedly said it wants to keep oil and gasoline prices low.

“The Saudi government is not too concerned about siding with Russia from the perspective of the US administration,” Hollande wrote in a note on Monday. This “points to a less certain world ahead, and as a result higher long-term energy prices.”

It could also affect the Federal Reserve, which has indicated it may be about to end its tightening campaign as inflation shows signs of abating. The odds of another quarter-point rally at the next meeting on May 3 have risen to about 60% from less than 50% yesterday, according to the CME FedWatch Tool.

“It will take some time to see exactly how much this affects global prices as demand concerns persist, but this is another potential factor exerting upward pressure on inflation after it was a largely improving factor this year,” analysts at Deutsche Bank said Monday morning. NB.

Warren Patterson, an analyst at ING, revised forecasts for oil prices in the second half of the year after the OPEC announcement. He now sees Brent crude averaging $101 a barrel in the second half, up from $97 a barrel previously.

Write to Brian Swint at [email protected]