The Brent crude oil opening price increased sharply in early morning trading on Monday 3rd April. The upward price movement continued, ultimately closing at $84.93, up 6.5% on the day.
The price move was chiefly attributable to a surprise voluntary oil output cut by the Organization of Petroleum Exporting Countries (OPEC). Late on 2nd April, OPEC announced an output cut of 1.16m barrels per day (bpd), with total OPEC cuts now amounting to 3.66m bpd.
OPEC cuts have added bullish pressure to the oil market over recent months, following a decision in November 2022 to cut output by 2m bpd.
The market was taken by surprise by the most recent cut, however, with market participants now anticipating that the oil price could be at the start of a new uptrend, given the likely reduced supply following the voluntary output cut on 2nd April.
More broadly, the output cut and consequent price rise have led to fears that energy prices may once again result in heightened overall inflation. This concern was visible in the market, as participants thought it was increasingly likely that the Federal Reserve would continue with interest rate hikes.
Accordingly, precious metal prices fell yesterday, as the opportunity cost of holding non-yielding bullion increases when interest rates are likely to rise.
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