On Monday, oil prices surged following Saudi Arabia’s decision to reduce its output by one million barrels in an effort to support prices. Additionally, other members of OPEC+ agreed to extend current production cuts until 2024.
The international benchmark Brent oil and the US counterpart WTI crude initially rose by over two percent, although they later moderated their gains. Brent reached a 1.6 percent increase, reaching $77.35 per barrel, while West Texas Intermediate rose by 1.5 percent, reaching $72.82 per barrel.
Saudi Arabia has taken decisive action by implementing production cuts, demonstrating their commitment to stabilizing the oil market. While the 23-nation OPEC+ alliance, including Russia, agreed to extend existing output cuts until the end of the next year, Saudi Arabia announced its own additional reduction, which will bring their July production down to nine million barrels per day. Saudi Energy Minister Prince Abdulaziz bin Salman emphasized their determination to bring stability to the market.
The OPEC+ nations are facing challenges due to declining prices and concerns over weakened oil demand amid struggles to control high inflation in major economies. Since April, when several OPEC+ members voluntarily cut production by over one million barrels per day, oil prices have fallen by approximately 10%.
Experts believe that Saudi Arabia will continue to play a significant role in implementing production cuts, with hopes that their efforts will reverse the downward price trend. However, the overall speculative demand for oil will continue to be driven primarily by macroeconomic data.
Market analysts are closely monitoring economic indicators, including the recent US jobs report, which showed better-than-expected job additions in May. The report indicated a strong labor market, which contributed to Wall Street’s surge. However, the upcoming inflation data will be critical in shaping market sentiment and influencing the Federal Reserve’s policy decisions.
Overall, the market remains cautious and awaits further economic data to assess the potential impact on oil prices and the direction of central bank policies.