Oil prices jump over $2/barrel after Saudi Arabia pledges to further cut production

By Florence Tan

SINGAPORE (Reuters) – Oil prices jumped more than $2 a barrel at the start of Asian trade on Monday, hours after the world’s top exporter Saudi Arabia pledged to cut output by a another million barrels per day from July.

Brent crude futures were at $78.42 a barrel, up $2.29, or 3%, at 2219 GMT after hitting a high of $78.73 a barrel earlier.

U.S. West Texas Intermediate crude climbed $2.27 a barrel, up 3.2%, or $74.01 a barrel, after hitting an intraday high of $75.06 a barrel.

Saudi Arabia’s output would fall to 9 million barrels per day (bpd) in July from around 10 million bpd in May, the biggest cut in years, its energy ministry said in a statement.

The voluntary reduction pledged by Saudi Arabia comes on top of a broader agreement reached by the Organization of the Petroleum Exporting Countries and their allies, including Russia, to limit supply until 2024 as the group seeks to drive down oil prices.

The group, known as OPEC+, pumps around 40% of global crude and has implemented cuts of 3.66 million bpd, or 3.6% of global demand.

“Saudi Arabia’s decision is likely to come as a surprise, given that the last quota change was only in effect for a month,” ANZ analysts said in a note.

“The oil market now looks to be even tighter in the second half.”

However, many of these reductions will not be real as the group has lowered targets for Russia, Nigeria and Angola to bring them in line with current actual production levels.

On the other hand, the United Arab Emirates was allowed to raise its production targets by around 0.2 million bpd to 3.22 million bpd.

“The UAE has been allowed to increase production, at the expense of African nations, whose unused quotas have been reduced under the new deal,” ANZ said.

(Reporting by Florence Tan; editing by Diane Craft)

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