(News Bulletin 247) – The majors and oil services companies are moving up sharply on the various stock markets on Monday, after several countries including Saudi Arabia announced production cuts exceeding 1.15 million barrels per day.

This is the sector that has the wind in its sails this Monday morning: the oil and oil services groups prance at the top of the European indices, driven by the rise in the price of black gold.

Around 10:20 a.m. on Monday, TotalEnergies posted the biggest rise in the CAC 40, gaining 4%. Excluding the CAC 40, the producer of seamless tubes for the oil industry Vallourec wins 3% while CGG takes 5.8%. In London, BP and Shell took 4.2% and 4% respectively. In Milan, the oil services group Saipem gains 5%.

All of these stocks come in the wake of rising oil contracts. Brent crude from the North Sea for delivery in June rose 5.6% to 84.36 dollars a barrel, while that of May on WTI listed in New York rose 5.6% to 79.87 dollars a barrel.

Stabilize the market

Black gold reacts to the surprise announcement on Sunday of production cuts from several member countries of OPEC+ (the Organization of Petroleum Exporting Countries associated with certain countries including Russia). Saudi Arabia has decided to implement cuts of 500,000 barrels per day from May until the end of the year, followed by Iraq (211,000), the United Arab Emirates (144,000), Kuwait (128,000), Kazakhstan (78,000), Algeria (48,000) and Oman (40,000).

In total, these declines exceed 1.15 million barrels per day, or about 1% of daily world production, which stands at around 100 million barrels per day.

Quoted by Associated Press, Saudi Arabia’s energy ministry said the move was a “preventive measure” intended to stabilize the oil market as Brent crude neared $70 a barrel over the past month. following the crisis which shook the banks on the market.

For UBS this announcement raises “concerns” about the strength of demand for black gold.

The decision by the oil-producing countries also comes as the financial markets were just beginning to stabilize, the movement of fear on the banks having subsided last week.

A risky strategy

“At such a fragile stage in the recent upturn in optimism, it’s hard to imagine a riskier strategy, even as prices hit 15-month lows following last month’s banking crisis. “, comments Michael Hewson of CMC Markets.

“It now appears that OPEC+ prefers prices near $90 a barrel rather than $80, which might be fine for them, but could make inflationary pressures for everyone else much harder to control,” notes- he.

“This move sends a pretty strong signal to the market that they are going to support prices,” Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd, told Bloomberg TV, adding that the likelihood of crude hitting $100 again “has certainly increased.”

Goldman Sachs has raised its price targets for Brent, expecting a barrel of 95 dollars for December 2023 and 100 dollars for December 2024, respectively up 5 dollars and 3 dollars compared to its previous forecasts.