Oil prices advanced at the week’s open after Saudi Arabia said it would make an extra 1 million barrel-a-day supply cut next month, taking its production to the lowest level for several years following a slide in prices.
West Texas Intermediate jumped almost 5 percent early in the session before paring gains to trade below US$73 a barrel, while global benchmark Brent changed hands at about US$77.
Saudi Arabian Minister of Energy Prince Abdulaziz bin Salman said he “will do whatever is necessary to bring stability to this market” following a tense OPEC+ meeting over the weekend.
Photo: AFP
VOLUNTARY
“The voluntary cut, in my view, is notable more for downside protection” rather than to spur a sustained rally, said Vivek Dhar, director of mining and energy commodities research at Commonwealth Bank of Australia.
Markets might return to focus on the broader outlook of macroeconomic weakness, he said.
Oil in New York tumbled 11 percent last month as demand concerns weighed on the outlook, especially in China.
Most market watchers, including Goldman Sachs Group Inc, had expected OPEC+ to keep output unchanged, and the rest of the 23-nation coalition offered no additional action.
That has left Saudi Arabia potentially sacrificing further market share to stabilize the market. While others in the group pledged to maintain their existing cuts until the end of next year, Russia made no commitment to curb output further and the United Arab Emirates (UAE) secured a higher production quota for next year.
AFRICA
The OPEC+ deal came after a long dispute with African members over how their cuts are measured, which delayed the start of the meeting by several hours.
Next month’s additional cut could be extended, but the Saudis will keep the market “in suspense” about whether this will happen, Prince Abdulaziz said.
The minister has repeatedly sought to hurt bearish oil speculators, warning them to “watch out” in the buildup to Sunday’s meeting.
“Saudi Arabia would ideally want prices to be above US$80 a barrel,” Vandana Hari, the founder of Vanda Insights in Singapore, said on Bloomberg television, referring to Brent.
If the health of the global economy falters, the short sellers “will be back in no time,” she said.
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