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Year 2023 | From $82 to near $100 and back: How Brent crude moved in 2023 over OPEC+ cuts and more
Crude oil benchmark Brent futures has moved sideways in the last one year – between January to December 2023, majorly due to the supply cuts announced by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) as well as the Israel-Hamas war. Oil majors including Saudi Arabia and Russia have since then defended the oil production cuts as a precautionary measure, aimed at the ‘stability of the oil market’.
Among other reasons, a stronger US dollar and the spike in US bond yields in the last few months have also dictated the movement of crude oil prices. However, the latest meeting by OPEC+ turned out to be disappointing for the uptrend of prices as investors saw limited impact of the supply cuts on oil markets.
What’s been the movement of crude oil prices in 2023?
The Group of Seven (G7) industrialized countries in 2022 imposed a price cap of $60 per barrel on Russian oil shipments in response to Russia’s invasion of Ukraine. Following this, crude prices remained volatile going into January 2023 and Brent crude hovered around $82 per barrel during the month.
In April 2023, OPEC+ announced oil production cuts of around 1.16 million barrels per day (bpd) in a surprise decision. The shock cut, led by Saudi Arabia, immediately drove crude oil prices 8 per cent higher to $83.95 a barrel, which at the time – was the highest rise in more than a year. The voluntary cuts started from May 2023 and were put in place to last until the end of the year.
OPEC+ met for its scheduled oil output policy decision in June 2023 and announced that it will reduce overall production targets from 2024 by a further total of 1.4 million bpd. OPEC nations produce around 30 per cent of the world’s crude oil. Saudi Arabia is the largest oil producer within the cartel, producing more than 10 million bpd. OPEC+ pumps around 40 per cent of the world’s crude.
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