Oil advanced at the week’s open after Saudi Arabia said it will make an extra 1 million barrel-a-day supply cut in July, taking its production to the lowest level for several years following a slide in crude prices.
West Texas Intermediate rose as much as 4.6% to $75.06 a barrel at 6:15 a.m. Singapore time. Most market watchers including Goldman Sachs Group Inc. had expected OPEC+ to keep output unchanged.
The Saudi effort to bolster the price of its most important export requires the sacrifice of further market share and came after a weekend meeting of OPEC+. Russia made no commitment to cut output deeper, the United Arab Emirates secured a higher production quota for 2024, while the rest of the 23-nation group offered no additional action but did pledge to maintain their existing cuts until the end of 2024.
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.
The kingdom is doubling down after the previous round of curbs — agreed just two months ago — failed to deliver a sustained price rally. OPEC+ announced a surprise supply reduction of about 1.6 million barrels a day in early April, but since then weak economic data from China have weighed on oil futures, which fell 11% in New York in May.
The OPEC+ deal came after a long dispute with African members over how their cuts are measured, which delayed the start of the group’s conference by several hours.