Oil prices surged as much as 8 percent early Monday morning, with Brent Crude making a high of $86.44 after Saudi Arabia and OPEC+ announced a surprise cut in production of around 1.16 million barrels per day.

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The news comes just days after a slowdown in US prices had boosted sentiment in the market, triggering a rally across global equities. The cuts will begin in May and will go on till the end of the year.

According to Daan Struyven of Goldman Sachs, OPEC+ has very significant pricing power relative to the past, and this surprise cut is consistent with their new doctrine to act pre-emptively because they can without significant losses in market share.

"As we already assumed that Russia cuts would extend into H2 of 2023, we are lowering our OPEC+ production end-2023 forecast by 1.1 mbpd," he said.

Goldman Sachs has therefore raised its price target on Brent crude to $95 per barrel by the end of the year and $100 per barrel in 2024.

Also Read | Oil prices surge as much as 8% after OPEC+ announces surprise output cut

In an interview with CNBC-TV18, David Lennox, Analyst at Fat Prophets said that the markets were caught off guard by the output cut that was slated to take place in May. This move was not expected by many traders, and it could have a significant impact on the price of oil going forward.

However, Lennox also noted that OPEC is pushing for higher prices, and he suspects that we will see prices begin to climb soon. This could be driven by several factors, including rising demand for oil as the global economy continues to recover and increased geopolitical tensions in oil-producing regions.

Talking about oil prices, he said, “In the short-term, between $85 and $87, but perhaps longer term, we could see the oil prices weaken and we wouldn't be too surprised.”

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Also, according to the Goldman Sachs Research team’s analysis, the producer group historically opens the taps when US demand surges, but it rarely adjusts production for demand growth from China. Last month, the brokerage had a target of $107 per barrel on Brent, in case the OPEC+ persists with its hikes.

In addition, OPEC is enjoying increased pricing power in the market as US producers remain on the side-line and Russia faces global sanctions over the war in Ukraine, which leaves more room for prices to rise without hurting OPEC demand too much, the report added.

(With inputs from Agencies+ Goldman Sachs)

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(Edited by : Hormaz Fatakia)