The OPEC+ alliance – comprising OPEC and non-OPEC oil producers – shocked the market over the weekend by announcing further voluntary cuts amounting to 1.66m barrels per day from May to December 2023.

The decision is among shocking factors the global energy market had not experienced in recent years.

As of January 2023, the global energy market had expected a 2.6 mbd increase, which was largely based on the termination of China’s quarantine requirements. Although China has returned and relative stability in Asian markets – main oil customers – has been restored, the estimates for the global oil demand have been reduced.

The price of international oil benchmark Brent crude stood at $74 per barrel last week, raising the alarm for OPEC and OPEC+.

Based on the figures, the biggest part of the output slash will be done by Saudi Arabia, Iraq, the United Arab Emirates, Kuwait, and Oman, indicating a major development – return of oil policymaking center to the Persian Gulf and the Middle East.

From another angle, the decision made by OPEC+ at this juncture is also very important. The U.S. was about to refill its Strategic Petroleum Reserve (SPR). President Joe Biden had announced that the refilling of the SPR would start when the price stood at $70. The SPR, which is now used to balance the market, has lost its strategic concept, while OPEC+ has made a completely strategic decision – putting and end to oil policies dictated by Washington.

Given the status quo, in which U.S. and European economies are faced with high inflation, collapse of banks, and risks posed by stagflation, the OPEC+ move is strategic and meaningful.

Brent crude oil hit $86.44 in early Monday morning trading, dropping to $84.23 around noon. This is while the market has yet to witness the cuts – starting May 1.

Fereydoun Barkeshli is the president of Vienna Energy Research Group.