Oil price surge 2% amid further Saudi production cut

Oil prices rose by two percent on Tuesday after Saudi Arabia  announced plans to reduce production to nearly 9.8 million barrels per day (mbd) in March from above 11 mbd in November last year.

International benchmark Brent crude futures were trading up at $1.5, or 2.5 percent, at $63.04 per barrel, while the US West Texas Intermediate (WTI) crude futures rose $1.4, or 2.6 percent, at $53.77 a barrel (4.30pm Riyadh time).

In an interview with Financial Times, Saudi Energy Minister Khalid Al-Falih said the Kingdom would reduce production to nearly 9.8 million barrels per day (mbd) from above 11 mbd in November 2018.

In addition, OPEC’s latest report said the Kingdom’s crude oil production fell by 350,000 barrels per day to average 10.21 mbd in January.

“Global oil prices seem to be finding ample support from OPEC-led production cuts and US sanctions against Venezuela’s oil sector. Recent comments from Saudi Arabia stating that it will reduce oil production to nearly 9.8 mbd in March is clearly fueling upside gains,” Lukman Otunuga, Research Analyst at FXTM, told Argaam.

“With the partial closure of the Keystone pipeline also triggering concerns of possible supply shocks, oil prices are likely to remain buoyed in the near term. However, bulls are seen facing numerous headwinds down the road. The medium- to longer-term outlook for oil remains clouded by surging US shale production and uncertainty over the outcome of ongoing US-China trade talks,” he added.

Write to Parag Deulgaonkar at parag.d@argaamplus.com