2023-06-05 01:50:54
Oil prices rose more than $2 a barrel early in the Asian market on Monday, hours after Saudi Arabia, the world’s biggest exporter, pledged to cut production by another 1 million barrels a day from July.
Brent crude futures were at $78.42 a barrel, up $2.29, or 3%, at 10:19 pm GMT after hitting a session high of $78.73 a barrel.
US West Texas Intermediate crude rose $2.27 a barrel, up 3.2% or $74.01 a barrel, after hitting a high of $75.06 a barrel.
Saudi Arabia’s output would drop to 9 million barrels per day (bpd) in July from around 10 million bpd in May, the biggest drop in years, Saudi Arabia’s energy ministry said in a statement.
Saudi Arabia’s pledged voluntary cut comes on top of a broader agreement by the Organization of the Petroleum Exporting Countries and its allies, including Russia, to cap supply until 2024 as the group seeks to raise oil prices.
OPEC+ extracts about 40% of the world’s oil and has cuts of 3.66 million bpd, equivalent to 3.6% of global demand.
Saudi Arabia’s move will likely come as a surprise, considering the production cut decided in April 2023 only took effect by May.
The oil market now looks set to get even tighter in the second half of the year.
However, many of these reductions will not be real, as the group has lowered targets for Russia, Nigeria and Angola to bring them in line with current actual production levels.
On the other hand, the UAE was allowed to increase production targets by around 0.2 million bpd to 3.22 million bpd.
The UAE was allowed to expand production, at the expense of African countries, which had their unused quotas reduced under the new deal.
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