Oil prices up by 0.97% to $31.28 on Monday
Oil prices rallied on Monday as WTI Crude was up 2.02 per cent at $25.18, while Brent crude traded at $31.28, up 0.97 per cent. This is even as Saudi Arabia has pledged to cut oil production by an additional one million barrels per day.
Saudi Arabia’s new plan is coming against the background of Riyadh’s promised cuts made earlier as part of the OPEC+ production cut deal.
Oil prices began Monday’s trading session in the red as the market began to fear that the eased lockdowns could lead to the second wave of COVID-19 cases.
There had been reports in the media suggesting that data in China, South Korea, and Germany point towards a second wave of the deadly virus.
But on Monday morning, however, prices reversed their earlier losses and jumped after Saudi Arabia put out a statement saying that it would be complying, yet again, with its share of the cuts in June.
According to the official Saudi Press Agency, Saudi Arabia’s energy ministry ordered the Kingdom’s oil giant, Aramco, to reduce its crude oil production in June “by an extra voluntary amount of one million barrels per day, in addition to the reduction committed by the Kingdom in the latest OPEC+ agreement”.
Under the OPEC+ deal in effect from May 1, Saudi Arabia has pledged to cut its oil production to 8.5 million bpd.
It would be recalled that in April, Saudi intentionally flooded the market with oil in the midst of an epic price war with Russia, sending prices tumbling.
But with the voluntary additional reduction in June, the Saudis would produce 7.492 million bpd next month, according to a Saudi energy ministry official, cited by the Saudi Press Agency.
The energy ministry is also ordering Aramco to seek further cuts to its targeted production of 8.492 million bpd for May, after consultations with its customers.
“The ministry official emphasised that the Kingdom aims through this additional cut to encourage OPEC+ participants, as well as other producing countries, to comply with the production cuts they have committed to, and to provide additional voluntary cuts, in an effort to support the stability of global oil markets,” Saudi Arabia said.
