Oil futures rose yesterday on Tuesday, boosted by an unexpected commitment from Saudi Arabia to deepen production cuts in June in a bid to help drain the glut in the global market that has built up as the coronavirus pandemic crushed fuel demand.
Brent crude futures advanced 0.7 per cent, or 22 cents, to $29.85, after hitting an intraday high of $30.11 a barrel, reports Reuters. US West Texas Intermediate (WTI) crude futures were up 1.8 per cent, or 44 cents, at $24.58 after touching an intra-day high of $24.77 per barrel.
Saudi Arabia said overnight it would cut production by a further 1 million barrels per day (bpd) in June, slashing its total production to 7.5 million bpd, down nearly 40 per cent from April 2020. The United Arab Emirates and Kuwait committed to cut production by another 180,000 bpd in total. Kazakhstan has also ordered producers in large and mid-sized oil fields including Tengiz and Kashagan to cut oil output by around 22 per cent in the May to June period.
Still, the moves to deepen cuts raised questions for some about why the further cuts were needed. The cuts, combined with the world’s biggest economies relaxing coronavirus restrictions and stoking a gradual recovery in fuel demand, are expected to ease pressure on crude storage capacity.
However, in the wake of new outbreaks of the coronavirus, including in China and South Korea, the market is wary of a second wave of COVID-19 cases spurring renewed lockdowns. Data showing China’s April factory prices fell at the sharpest rate in four years also added to investor jitters as it revealed weak industrial demand. Inventory data this week will be key to extending the recent rally in oil prices, analysts said.