Oil prices surged over 5% on Monday after Saudi Arabia and other oil producers pledged to cut oil production by 1.15 million barrels per day until the end of the year.
U.S. benchmark crude oil climbed $3.91 to $79.58 per barrel, while Brent crude, the pricing basis for international oils, gained $4.13 to $84.02 per barrel. The production cut is expected to exacerbate high fuel prices and put pressure on central banks to control inflation. Higher oil prices also pose a political risk across Europe, particularly as some countries are struggling to cope with the burden of high fuel prices.
Despite the oil production cut announcement, Asian shares were mixed. The Tokyo Nikkei 225 index gained 0.5% while Hong Kong’s Hang Seng slipped 0.4%.
A quarterly survey by the Bank of Japan showed business sentiment among major Japanese manufacturers falling in the first quarter of this year. Meanwhile, surveys of purchasing managers in emerging Asian markets decreased last month, as export orders weakened, signalling a slowdown in the global economy. The banking industry’s recent troubles could also act as interest rate hikes, causing banks to withdraw lending and stifle hiring and growth.
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