Saudi Arabia’s vow to slash oil production in June as part of the measures to curb oil surplus at the global market and improve demand lifted the prices of crude early Tuesday.
The decision by the world’s biggest oil exporter to further cut output by one million barrels per day (bpd) caught investors unawares just as Kuwait equally promised to reduce supply by 80,000 barrels.
Brent crude, the benchmark for Nigerian oil grades, inched up by 0.5% or 15 cents to $29.78 at 06:00 West African Time. Earlier, it had reached $30.11 barrel.
America’s West Texas Intermediate climbed up by 1% or 26 cents, trading at $24.40 after hitting an intraday high of $24.77.
In the previous session, the price of Nigeria’s Bonny Light lifted by 1.20% or 30 cents to $25.23.
Saudi Arabia’s proposed cut will limit its total daily production to 7.5 million barrels, meaning it has curb supply by as much as 40% between April and now.
“This reduction in production provided excellent optics encouraging other OPEC+ members to comply and even offer additional voluntary cuts, which should quicken the global oil markets’ rebalancing act,” said Stephen Innes, chief global market strategist at AxiCorp.
The United Arab Emirates is also expected to bring down supply by a hundred thousand barrels.
Similarly, Kazakhstan aims to reduce output by roughly 22%, having told producers in some of its oil fields to do so between May and June.
“It was so sudden and so significant, it was just seen as: ‘Is this a proactive policy or just a reaction to weak demand?’” said Vivek Dhar of Commonwealth Bank in reaction to the trend.
As efforts to combat glut through cut intensify and the coronavirus lockdowns ease in the biggest economies in the world, the current strain on crude storage capacity is hoped to subside.