Oil prices have shot upwards following Saudi Arabia’s announcement to cut oil production by a million barrels per day (bpd) in July. This move is part of a broader strategy by OPEC+, a group of oil-producing countries, to stabilize falling oil prices. OPEC+ accounts for about 40% of the world’s crude oil, and their decisions significantly influence oil prices.
Brent crude oil, a global benchmark for oil prices, rose by 2.4% in Asian trade on Monday, settling at around $77 a barrel. OPEC+ also plans to reduce production targets by an additional 1.4 million bpd from 2024.
This development provides a real-world example of how supply and demand dynamics can influence commodity prices. It also highlights the role of strategic decision-making by major players in global markets.
THINK LIKE AN ECONOMIST!
Q1. Explain one reason why the price of oil may have been falling.
Q2. Analyse the impact a significant cut in oil production on the market for oil.
Q3. Discuss whether OPEC+ are justified in their manipulation of oil production to increases prices.
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