On Tuesday, oil futures rose on the back of unexpected Saudi Arabia’s decision to further cut oil output in June to help balance the global supply and demand in the midst of the coronavirus pandemic.
Brent crude oil futures jumped by 0.8% or 24 cents to USD29.87/barrel at 02.06 GMT after reaching the high of USD30.11/barrel. The US WTI crude oil futures edged up by 1.6% or 38 cents to USD24.52 after hitting a high of USD24.77/barrel.
Late on Monday, Saudi Arabia surprised the market by announcing an additional 1 million bpd cut in June. Its total production would be 7.5 million bpd, showing a 40% slump from the April rate.
Analyst Stephen Innes of AxiCorp noted that Saudi’s reduction could encourage other members of the Organization of Petroleum Exporting Countries and its non-member oil producer allies (OPEC+) to comply and even offer more voluntary cuts. If realized, the global oil market’s balance could return quicker than previously expected.
So far, the UAE and Kuwait have committed to slashing their outputs by a total of 180,000 bpd.
The cuts from producers, combined with the increasing demand for fuel following the relaxing coronavirus restrictions around the world, are likely to ease the pressure on the global crude storage capacity.
However, with the fear of the possibility of a second wave of coronavirus infections in some countries, the oil market is still anxious. According to economist Vivek Dhar of Commonwealth Bank, data on stockpiles this week will be important to assess the oil prices.
A preliminary Reuters poll showed that the US crude stockpiles possibly climbed by 4.3 million barrels in the week ended May 8.
Reports from the American Petroleum Institute (API) will go out today and the US Energy Information Administration (EIA)’s will go out Wednesday.
