West Texas Intermediate soared as much as 8%, the biggest intraday move in more than a year, and traded at $79.81 a barrel at 11:20am in Singapore time, while in wider markets the dollar advanced with Treasury yields.

The Organization of Petroleum Exporting Countries and allies including Russia pledged on Sunday to make the cuts from next month that will exceed 1 million barrels a day, with Saudi Arabia leading the way with 500,000 barrels. Traders had expected OPEC+ to hold output steady. The shock move came outside the group’s scheduled timetable for reviewing the market and members’ supply.

The decision’s impact was quickly felt across the global oil market. Goldman Sachs Group Inc lifted price forecasts for this year and next, key time spreads surged higher in an indication of expectations of tighter supply, and a usually quiet Asian trading session saw hundreds of thousands of contracts change hands. US gasoline futures also surged, underscoring the inflationary risks.

“This measure does send a pretty strong signal to the market that they’re going to support prices,” Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group, told Bloomberg TV, adding that the chance of crude hitting $100 again “certainly has increased”.

The White House said the OPEC+ decision was ill-advised, while adding the US would work with producers and consumers with a focus on petrol prices. Last year, President Joe Biden ordered an unprecedented release from the nation’s strategic crude reserves after the Russian invasion of Ukraine.

Ahead of the surprise intervention, crude capped its worst first-quarter drop since 2020 as banking sector turmoil and risks of recession in the US combined to hurt prices. Still, many market watchers have said they expect a revival in the second half, underpinned by rising demand in China after Covid Zero ended.

Fed’s task

Costlier crude prices threaten to spur still-elevated inflation, complicating the task facing central banks including the Federal Reserve to tame persistent price pressures. The Fed raised interest rates again last month, and officials are next scheduled to meet in May to set monetary policy.

News of the cuts overshadowed relief for the market from an agreement between Iraq’s semi-autonomous Kurdistan region and the federal government to resume oil exports through Turkey this week. The interruption to supply had helped WTI to rally more than 9% last week.

The OPEC+ “move has the potential to push the market into a deficit in the second quarter, versus earlier expectations of a surplus”, said Vandana Hari, the founder of Vanda Insights in Singapore. Still, higher prices may curtail some demand, as well as exacerbate the stubborn inflation that central banks are trying to combat, adding to recessionary risks, she added.