Brent crude oil and WTI crude oil prices rose 5% to $84 per barrel and $80 per barrel in early trading on Monday, as OPEC and its allies led by Russia announced unexpected production cuts of 1.657 million barrels per day to stabilize the oil market.

On Sunday evening, the unexpected production cuts by OPEC+oil producing countries dealt a heavy blow to short sellers of crude oil contracts. The opening prices of Brent crude oil and WTI crude oil increased by 8% to $85/barrel and $81.50/barrel respectively in short covering trading, before falling back to the current 5% increase during the day.

OPEC+has decided to take some positive measures to further reduce production in case the economic recession leads to a decrease in oil demand, especially after the sharp drop in oil prices caused by the banking crisis in mid March.

Investors were surprised by the new production reduction, as the decision was made outside of the OPEC monthly meeting, with the next meeting scheduled for late Monday.

The oil cartel announced that it will voluntarily reduce production by 1.16 million barrels per day from May to the end of 2023, which will be the largest reduction since the COVID-19 pandemic began, and Russia has also decided to reduce production by 500000 barrels per day during the same period.

Throughout the OPEC Group, the de facto leader Saudi Arabia has promised to reduce production by 500000 barrels per day, followed by other member countries such as Iraq's 221000, the United Arab Emirates' 114000, and Kuwait's 128000, as well as other smaller production cuts in Algeria, Oman, Gabon, and Kazakhstan.

With the new production reduction, the total production reduction of OPEC+will reach 3.66 million barrels per day, accounting for 3.7% of global oil demand.

Nine production members were selected to participate in the new production reduction agreement, indicating that loyalty to the reduction may be stronger than in the past.

In October 2022, OPEC announced its decision to reduce production by 2 million barrels per day due to liquidity restrictions led by China's Covid, leading to a decline in global oil demand momentum.

As expected, the Biden administration criticized this move, stating that it is not the time to reduce production. A spokesperson for the National Security Council stated that due to market uncertainty, it is not appropriate to reduce production at this time.