Economy

Oil extends gains after surprise Saudi output cut

Oil extends gains after surprise Saudi output cut”

"The 1 million barrel per day reduction is nothing to scoff at and it will tip the market back into a supply deficit for the first quarter at least, even if demand is set to dip slightly on the new virus strain", said Howie Lee, an economist at Oversea-Chinese Banking Corp.

Saudi Arabia has pledged additional, voluntary oil output cuts of one million barrels per day (bpd) in February and March as part of a deal under which most Opec+ producers will hold production steady in the face of new coronavirus lockdowns.

United States crude rose 1.6% to the highest since February 2020 at $50.57 a barrel, after opening at $49.79, and hit a low of $49.71, and Brent crude rose 2.1% to, the highest since February at $54.60 a barrel, after opening at $53.51, and hit a low of $53.51.

The worldwide oil benchmark, Brent crude, extended its gains on Friday, rising above $55 per barrel, in what is a potential boost to Nigeria's crude oil export revenue. The contract on Tuesday closed up 4.6%.

"From our read-through of the recently-announced Petronas Activity Outlook 2021-2023, we gathered that overall activity levels are still expected to stagnate for the coming year, as most of the value chains are expected to see flattish or lower activity levels in 2021, from 2020".

The group initially failed to agree on production levels for February during a meeting on Monday.

More news: Quebec COVID curfew raises concerns over enforcement, profiling, advocates say

Opec+, a group combining Opec and allies such as Russian Federation, meets later on Monday after a meeting of Opec+ experts on Sunday when Opec Secretary-General Mohammad Barkindo said he saw downside risks for oil markets in the first half of 2021.

In order for Oil prices to continue its return to pre-pandemic levels, not only must the global economic recovery stay the course, OPEC+ members must also demonstrate a unified will and maintain the discipline to manage output levels.
As per the latest report, the Saudi announcement came as the Organization of the Petroleum Exporting Countries and allies, or OPEC+, closed the second day of its Joint Ministerial Monitoring Committee and the 13th OPEC and non-OPEC Ministerial Meeting.

USA crude gained 5.2% yesterday, and Brent crude futures rose 5.5%, the largest daily gain since November 9, after the OPEC-Plus monthly meeting concluded.

Analysts see oil prices to be in a delicate balancing act to sustain the current uptrend, while demand is nearly certain to recover going into 2021.

U.S. crude stocks fell and fuel inventories rose, the Energy Information Administration said on Wednesday.



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