Oil Prices Soar as Saudi Arabia Announces 1 Million Barrel Production Cut

Oil prices rose more than $2 a barrel in early Asian trade on Monday, hours after the world’s top exporter Saudi Arabia pledged to cut output by a further 1 million barrels per day from July.

Brent crude futures were at $78.42 a barrel, up $2.29 or 3% by 2219 GMT, having earlier hit a session-high of $78.73 a barrel.

US West Texas Intermediate crude climbed 3.2%, or $74.01, to $2.27 a barrel after touching a high of $75.06 a barrel.

Saudi Arabia’s output will fall to 9 million barrels per day (bpd) in July from about 10 million bpd in May, its biggest reduction in years, its energy ministry said in a statement.

The voluntary cuts pledged by Saudi are on top of a broader deal by the Organization of the Petroleum Exporting Countries and their allies including Russia to limit supply through 2024 as the grouping seeks to boost oil prices.

The grouping, known as OPEC+, pumps about 40% of the world’s crude and has cut 3.66 million bpd, which is 3.6% of global demand.

“Saudi Arabia’s move is likely to come as a surprise, the most recent change to the quota has only been in effect for a month,” analysts at ANZ said in a note.

“The oil market is now looking like it will be even tighter in the second half of the year.”

However, many of these cuts will not materialize as the group reduced the targets for Russia, Nigeria and Angola to bring them in line with actual current production levels.

In contrast, the United Arab Emirates was allowed to raise production targets by about 0.2 million bpd to 3.22 million bpd.

“The UAE has been allowed to expand production at the expense of African countries whose unused quotas were reduced under the new agreement,” ANZ said.

(This story has not been edited by News18 staff and is published from a syndicated news agency feed – reuters,