Oil prices rise after Saudi Arabia pledge to deepen production cuts in June; Brent crude up 1.3%

Oil prices rose on Tuesday, boosted by an unexpected commitment from Saudi Arabia to deepen production cuts in June to help drain a supply glut built up during the coronavirus crisis

Reuters May 12, 2020 15:55:11 IST
Oil prices rise after Saudi Arabia pledge to deepen production cuts in June; Brent crude up 1.3%

London: Oil prices rose on Tuesday, boosted by an unexpected commitment from Saudi Arabia to deepen production cuts in June to help drain a supply glut built up during the coronavirus crisis.

Brent crude advanced 38 cents, or 1.3 percent, to $30.01 at 0830 GMT, while US West Texas Intermediate (WTI) crude futures were up 70 cents, or 2.9 percent, at $24.84.

Saudi Arabia said on Monday it would cut output by a further 1 million barrels per day (bpd) in June, slashing total production to 7.5 million bpd, or down nearly 40 percent from April.

Oil prices rise after Saudi Arabia pledge to deepen production cuts in June Brent crude up 13

Representative image. Reuters

The United Arab Emirates and Kuwait also committed to cut an extra 180,000 bpd in total, adding to reductions the producers agreed under a deal between OPEC, Russia and other nations, a group known as OPEC+.

But both benchmark crudes still fell on Monday, despite those announcements, amid fears output cuts are still not enough to balance a market where demand has been hammered by the coronavirus and where consumption could be hit again by a second wave of infections.

“The market is obviously far from certain that the additional cuts announced yesterday will be able to drive the oil price materially higher. But, today, the conclusion is that yes, the additional cuts are naturally positive on the margin,” said Bjarne Schieldrop, chief commodities analyst with SEB Bank.

Kazakhstan has ordered producers in large and mid-sized oil fields to cut output by about 22 percent in May to June, in line with the OPEC+ deal.

Output cuts, along with the easing of lockdowns in some countries that has helped lift fuel demand, are expected to ease pressure on crude storage capacity. But renewed coronavirus outbreaks in China and South Korea have revived concerns.

Data showing China’s April factory prices fell at the sharpest rate in four years added to investor jitters, revealing weak industrial demand.

“On the demand side there’s probably a view that the worst may be behind us, in terms of the peak damage point. If we do see a second wave, that would hurt demand and hurt pricing,” Commonwealth Bank’s Vivek Dhar said.

Inventory data this week will be key to extending any oil price rally.

US crude inventories likely rose by about 4.3 million barrels in the week to 8 May, a preliminary Reuters poll showed, before reports from the American Petroleum Institute industry group on Tuesday and the US Energy Information Administration on Wednesday.

Updated Date:

also read

Moderna CEO says vaccines likely no match for Omicron variant; stock markets sink on comment
Health

Moderna CEO says vaccines likely no match for Omicron variant; stock markets sink on comment

Stephane Bancel's warning came as G7 health ministers held emergency talks on the new variant, which is spreading around the world and prompting nations to close their borders once again or impose fresh travel restrictions

Omicron variant: RT-PCR test must for passengers from or passing through 'at-risk' countries, says health ministry
India

Omicron variant: RT-PCR test must for passengers from or passing through 'at-risk' countries, says health ministry

This standard operating procedure shall be valid from 1 December till further orders. The revised guidelines will supersede earlier ones issued on and after 11 November.

South Africa's Cyril Ramaphosa advances crucial COVID-19 meeting as global concern over Omicron spikes
World

South Africa's Cyril Ramaphosa advances crucial COVID-19 meeting as global concern over Omicron spikes

The meeting, which was originally scheduled for Sunday, comes as a growing number of European countries are following UK's lead in banning travel to and from South Africa and neighbouring countries