Crude oil futures traded higher in midmorning Asia trade Tuesday after Saudi Arabia announced Monday that it would cut output beyond its OPEC+ production quota.
At 10:07 am Singapore time (0207 GMT), ICE July Brent crude futures rose 24 cents/b (0.81%) from Monday’s settle at $29.87/b, while the NYMEX June light sweet crude contract was 40 cents/b (1.66%) higher at $24.54/b.
Saudi Arabia will voluntarily cut an additional 1 million b/d of its crude oil production in June below its quota under the OPEC+ agreement and hold its output at 7.492 million b/d, the official Saudi Press Agency reported Monday.
“This move by Saudi Arabia adds another factor to a list of supporting bullish factors for the oil market, including rising crack spreads and refinery run rates in both the US and China,” said OCBC analysts in a note Tuesday.
More countries have started to ease lockdown restrictions in recent weeks, which could support a gradual recovery in refined products demand.
Nonetheless, refiners are likely to remain cautious in scrutinizing supply and demand daily when planning daily run rates.
Concerns remained around the ability of producers to sustain the supply cuts, analysts highlighted.
“Producers also seem ready to increase output as soon as prices rebound…And while demand appears to be recovering, there are also doubts as to its timing,” said ANZ analysts in a note Tuesday.
The upward rally in Brent crude prices late last week dissipated this week as investors remained skeptical of the extent in demand recovery.
“In the US, the volume of fuel sold by retailers rose by only 7% in the week ending May 2. In Europe, the varying degrees of lockdowns continues to hobble demand,” added the ANZ analysts.
A resurgence of coronavirus cases in some Asian countries prompted demand concerns even as Europe and the US continued with their phased reopenings.