Oil prices turned higher on Monday, erasing earlier losses after the world’s top oil exporter and OPEC leader, Saudi Arabia, said it would cut oil production by an additional 1 million barrels per day (bpd) on top of its promised cuts as part of the OPEC+ production cut deal.
As of 8:43 a.m. EDT on Monday, WTI Crude was up 2.02 percent at $25.18, and Brent Crude was trading up 0.97 percent on the day to $31.28.
Oil prices began Monday’s trading session in the red as the market began to fear that the eased lockdowns could lead to a second wave of COVID-19 cases, as some data in China, South Korea, and Germany could suggest.
By the early morning EDT, however, prices reversed their earlier losses and jumped after Saudi Arabia put out a statement saying that it would be significantly over-complying, again, with its share of the cuts in June.
Saudi Arabia’s energy ministry ordered the Kingdom’s oil giant Aramco to reduce its crude oil production in June “by an extra voluntary amount of one million barrels per day, in addition to the reduction committed by the Kingdom in the latest OPEC+ agreement,” the official Saudi Press Agency reported.
Under the OPEC+ deal in effect from May 1, Saudi Arabia has pledged to cut its oil production to 8.5 million bpd.
With the voluntary additional reduction in June, the Saudis would produce 7.492 million bpd next month, according to a Saudi energy ministry official, cited by the Saudi Press Agency. The energy ministry is also ordering Aramco to seek further cuts to its targeted production of 8.492 million bpd for May, after consultations with its customers.
“The Ministry Official emphasized that the Kingdom aims through this additional cut to encourage OPEC+ participants, as well as other producing countries, to comply with the production cuts they have committed to, and to provide additional voluntary cuts, in an effort to support the stability of global oil markets,” Saudi Arabia said on the day on which it also announced ‘tough’ economic austerity measures as its oil revenues—the key source of budget income—plunged with the collapse in oil prices.