LONDON: Oil rallied on Monday after key producer Saudi Arabia slashed output by a million barrels in a bid to prop up prices, while fellow Opec+ members agreed to continue current cuts to 2024.

International benchmark Brent oil and US counterpart WTI crude won more than two per cent before pairing gains.

Brent North Sea crude jumped 2.3 per cent to $77.87 per barrel and the West Texas Intermediate added 2.4pc at $73.49 per barrel.

“The outcome of the much-anticipated Opec+ meeting has created a splash in the oil market, if not a wave,” said KCM Trade analyst Tim Waterer.

“Saudi Arabia has backed up their words with actions by going it alone and extending their supply cuts.” The 23-nation Opec+ alliance, which includes Russia, agreed Sunday to continue current output cuts until the end of next year.

But influential player Saudi Arabia also announced its own new cutback taking July production to nine million barrels per day.

Saudi Energy Minister Prince Abdulaziz bin Salman told reporters that he “will do whatever is necessary to bring stability to this market”.Opec+ nations are grappling with falling prices on concerns oil demand will weaken as major economies struggle to cool elevated inflation.

Oil has plummeted about 10 per cent since April, when several Opec+ members agreed to cut production voluntarily by more than one million bpd in an attempt to stem losses.

“Saudi will continue doing the heavy lifting of production cuts, hoping that its efforts will reverse the falling price trend,” noted Swissquote Bank analyst Ipek Ozkardeskaya.

Stephen Innes, managing partner at SPI Asset Management, said it was a normal reaction for oil prices to rise following the Saudi production cut.

“Regardless, macroeconomic data will continue to be the primary driver of speculative oil demand,” he said.

Share markets mixed

Asian equities mostly rose, with Tokyo piling on more than two percent to hit a three-decade peak, but European stock markets fell.

Wall Street traded mixed after having rallied on Friday on strong US jobs data that lifted hopes the US Federal Reserve will refrain from hiking interest rates next week.

Sentiment also remains largely buoyant after the United States clinched a breakthrough deal late last week to lift its debt ceiling and avert a disastrous default.

Published in Dawn, June 6th, 2023