New York - Oil prices surged on Monday after major producers unveiled a surprising decision over the weekend to cut output.

Photo taken on October 5, 2022, shows the press center at the headquarters of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna, Austria. (Photo/Wang Zhou, Xinhua)

The West Texas Intermediate (WTI) for May delivery experienced a significant boost, rising by 4.75 U.S. dollars, or 6.28 percent, to settle at 80.42 dollars a barrel on the New York Mercantile Exchange. Brent crude for June delivery also increased by 5.04 dollars, or 6.31 percent, to close at 84.93 dollars a barrel on the London ICE Futures Exchange. According to Dow Jones Market Data, this rally marks the largest daily gain for WTI since April 12, 2022, and the best daily performance for Brent since March 21, 2022.

OPEC and its allies, collectively known as OPEC+, unexpectedly announced crude output cuts of more than 1 million barrels per day (bpd) from May until the end of 2023. Saudi Arabia will lead with a voluntary cut of 500,000 bpd, while other participating countries include Iraq, the United Arab Emirates, Kuwait, Algeria, Oman, Kazakhstan, and Gabon. Russia also stated that it would extend a voluntary cut of 500,000 bpd until the end of the year. This will bring the total additional voluntary production adjustments made by these countries to 1.66 million bpd, as stated by OPEC in a statement on Monday. The move aims to "support the stability of the oil market."

Goldman Sachs raised its oil price forecast following the cuts and predicts that Brent could hit 95 dollars a barrel by December 2023, compared to a prior estimate of 90 dollars a barrel. The bank also raised its Brent crude forecast for 2024, now projecting it to reach 100 dollars a barrel at the end of the year from an earlier estimate of 97 dollars. UBS analysts also hold a positive price outlook for oil, stating that "fundamentals support a tightening of the oil market" in a note on Monday. They also rated oil as the most preferred commodity in their global strategy as part of their optimistic outlook for commodities overall.

In March, oil prices faced pressure due to banking turbulence in the United States and Europe, which caused recession fears.