After Saudi Arabia opted to reduce oil output by an additional 1 million barrels per day (bpd) starting in July, crude oil prices rose by about 2% on Monday, with the global benchmark Brent oil leaping beyond $77 per barrel.
After reaching a session high of $78.73, Brent oil futures increased 1.73% to $77.45 a barrel, while US West Texas Intermediate crude increased 1.87% to $73.08 after reaching an intraday high of $75.06. On Friday, both contracts had increased by 2%.
Saudi Arabia said that it would decrease its output from roughly 10 million bpd in May to 9 million bpd in July. According to Reuters, this production comes on top of a larger agreement by the Organisation of the Petroleum Exporting Countries (OPEC) and allies, notably Russia, to limit supply until 2024 in an effort to revive falling oil prices.
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OPEC+ came to an agreement on output strategy and planned to cut overall production objectives by a total of 1.4 million barrels per day (bpd) starting in 2024.
According to consulting firm Rystad Energy, the extra Saudi reduction would likely cause the market gap to reach more than 3 million bpd in July, which might raise prices in the upcoming weeks.
In the meantime, economists anticipate that worries about demand will limit the rise in oil prices.
“Slowing sales in the US and China continues to be a concern. Additionally, the strength of the US dollar would limit the increase in crude oil prices, according to Ajay Kedia, Director of Kedia Advisory.
Kedia anticipates resistance for Brent oil between $79.50 to 79.50 levels, while WTI crude may encounter a barrier at $75 per barrel. Support for Brent oil is anticipated at $73 per barrel, while WTI crude is anticipated to be around $68.50 per barrel.
As part of a larger OPEC+ agreement to curb output, Saudi Arabia, the largest member of the OPEC cartel, will begin making significant production cutbacks of 1 million bpd in July. The remaining OPEC members decided to prolong earlier supply restraints through the end of 2024.
The oil-producing company had unexpectedly reduced production by 1.16 million bpd in April.
Approximately forty percent of the world’s petroleum is produced by OPEC+, which has reduced its annual production target by 3.66 million bpd, or 3.6% of demand, for the year.
Domestically, MCX crude costs were up 2.18% at $6,045 per barrel.
Kedia anticipates that the declining rupee would help oil prices even more on the domestic market, but she thinks that any additional gains are limited.
Kedia stated that “on MCX, crude oil may encounter resistance at the 6,350 level, while accommodation is positioned at the 5,720 level.”
