Oil market rallies on Saudi output cut

Oil rallied Monday after key producer Saudi Arabia slashed output by a million barrels in a bid to prop up prices, while fellow OPEC+ members agreed to continue current cuts to 2024.

International benchmark Brent oil and US counterpart WTI crude won more than two percent.

Asian and European stocks mainly climbed with energy majors boosted by higher crude futures, which boosts profit and revenues.

Wall Street opened flat after having rallied on Friday on strong US jobs data that lifted hopes the US Federal Reserve will refrain from hiking interest rates next week.

Sentiment also remains buoyant after the United States clinched a breakthrough deal late last week to lift its debt ceiling and avert a disastrous default.

– OPEC+ ‘creates splash’ –
“The outcome of the much-anticipated OPEC+ meeting has created a splash in the oil market, if not a wave,” said KCM Trade analyst Tim Waterer.

“Saudi Arabia has backed up their words with actions by going it alone and extending their supply cuts.”

The 23-nation OPEC+ alliance, which includes Russia, agreed Sunday to continue current output cuts until the end of next year.

But influential player Saudi Arabia also announced its own new cutback taking July production to nine million barrels per day.

Saudi Energy Minister Prince Abdulaziz bin Salman told reporters that he “will do whatever is necessary to bring stability to this market”.

OPEC+ nations are grappling with falling prices on concerns oil demand will weaken as major economies struggle to cool elevated inflation.

Oil has plummeted about 10 percent since April, when several OPEC+ members agreed to cut production voluntarily by more than one million bpd in an attempt to stem losses.

“Saudi will continue doing the heavy lifting of production cuts, hoping that its efforts will reverse the falling price trend,” noted Swissquote Bank analyst Ipek Ozkardeskaya.

Stephen Innes, managing partner at SPI Asset Management, said it was a normal reaction for oil prices to rise following the Saudi production cut.

“Regardless, macroeconomic data will continue to be the primary driver of speculative oil demand,” he said.

– ‘Goldilocks’ jobs report –
Wall Street had surged Friday after data showed the US economy added 339,000 jobs in May, far more than expected, indicating the labour market remained strong.

The report also revealed wage gains moderated slightly.

Analysts said the “Goldilocks” reading — neither too good nor too bad — suggested the world’s biggest economy was not facing an immediate risk of a recession and could still give the Fed room to hold policy steady.

The Fed has lifted rates 10 times since early last year to try and tame rampant inflation fuelled largely by energy costs.

In Asia, Hong Kong stocks extended Friday’s surge, while Tokyo piled on more than two percent to hit a three-decade peak.

Europe stocks ran out of steam as the morning progressed, although London was lifted by oil giants BP and Shell.

– Key figures around 1330 GMT –
Brent North Sea crude: UP 2.3 percent at $77.87 per barrel

West Texas Intermediate: UP 2.4 percent at $73.49 per barrel

New York – Dow: FLAT at 33,773.23 points

London – FTSE 100: UP 0.5 percent at 7,645.92

Frankfurt – DAX: UP less than 0.1 percent at 16,062.99

Paris – CAC 40: DOWN 0.3 percent at 7,252.56

EURO STOXX 50: DOWN less than 0.1 at 4,320.79

Tokyo – Nikkei 225: UP 2.2 percent at 32,217.43 (close)

Hong Kong – Hang Seng Index: UP 0.8 percent at 19,108.50 (close)

Shanghai – Composite: UP 0.1 percent at 3,232.44 (close)

Euro/dollar: DOWN at $1.0685 from $1.0708 on Friday

Dollar/yen: UP at 140.05 yen from 139.92 yen

Pound/dollar: DOWN at $1.2383 from $1.2453

Euro/pound: UP at 86.28 pence from 85.98 pence (AFP)