Oil jumped Monday after Saudi Arabia pledged to cut oil production another one million barrels a day in July as the Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed to stick to their current oil-production target through 2024.
Cartel members meeting in Vienna clashed over slowing global energy demand.
Brent crude,
the international benchmark, was up 2.7% to $78.14 a barrel in early trading, but was still down 9% so far this year.
West Texas Intermediate,
the U.S. standard, was also up, 2.8% to 73.70 a barrel, down 8.2% so far this year.
Pierre Veyret, an analyst at ActivTrades wrote in a Monday note: “Market sentiment is also being supported by bullish price action from oil markets, sparked by OPEC+’s pledge to add an extra 1 million barrel output cut in July.
“This has affected most benchmarks with a particular impact on the energy sector, which has registered one of the best performances so far.”
Top oil-producing nations known as OPEC+ had met amid growing tensions between Saudi Arabia and Russia over a previous agreement on production cuts. Russia’s continued pumping of cheaper crude has added to a global surplus and undermined Saudi Arabia’s efforts to boost energy prices, The Wall Street Journal said.
OPEC+ in October slashed output by two million barrels a day, despite the U.S. asking Saudi Arabia and its allies to increase production to help cut energy prices and high inflation. In April, some members, including Saudi Arabia and Russia, cut an additional 1.6 million barrels a day.
Oil prices have dropped sharply since October. Brent crude, the global benchmark, has dropped more than 20%, to around $76.40 a barrel, amid worries about the global economic outlook. April’s cuts initially boosted prices, but gains were soon erased, MarketWatch reported.
Saudi Arabia could extend the cut after July, but won’t say now whether that will happen, Bloomberg reported Saudi’s Energy Minister Prince Abdulaziz bin as saying. The cut announced Sunday brings Saudi’s production to nine million barrels a day in July, the lowest level since June 2021, the report said
Saudi officials and others say Riyadh’s budget needs crude at an estimated $81 a barrel to break even. Saudi economic advisors have warned senior policy makers that the kingdom needs higher oil prices for the next five years to keep spending on ambitious projects, the Journal reported.
Write to Rupert Steiner at rupert.steiner@barrons.com and Janet H. Cho at janet.cho@dowjones.com
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