Oil prices rose in early trade on Tuesday as supply concerns arising from production cuts by Saudi Arabia and Russia supported the market.
Brent crude futures rose 37 cents, or 0.4%, to $85.71 a barrel at 0010 GMT, while U.S. West Texas Intermediate crude was at $82.37 a barrel, up 43 cents or 0.5%.
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Both the contracts had settled around 1% lower in the previous trading session as investors braced for weaker demand from the world’s two biggest economies, China and the United States.
“Crude oil’s rally took a breather, facing key technical resistance ... But Saudi and Russia’s production cut could remain a bullish factor to oil markets,” said CMC Markets analyst Tina Teng in a note.
Saudi Arabia, the world’s top exporter, said it would extend a voluntary oil output cut of one million barrels per day for another month to include September, adding that it could extend the cut beyond that date or make a deeper cut to production after September.
Russia also said it would cut oil exports by 300,000 barrels per day in September.
“It’s unsurprising to see Saudi Arabia abide by its pledge to reduce output given its leadership role in OPEC+,” said Vivek Dhar, mining and energy commodities strategist at Commonwealth Bank of Australia, referring to the Organization of the Petroleum Exporting Countries, or OPEC, and allies led by Russia.
“Saudi Arabia’s decision to extend production cuts into September despite Brent futures rising above $80 per barrel suggests that the kingdom may be targeting a higher price than $80 per barrel.”
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An OPEC+ ministerial panel which met on Friday made no changes to the group’s current oil output policy after a Saudi decision to extend its voluntary production cut into September spurred a rally.
OPEC+ had agreed on a broad deal to limit supply into 2024 at its last policy meeting in June.
It maintained oil output cuts of 3.66 million barrels per day for 2023, and extended and deepened cuts from January 2024 by a further 1.4 million barrels per day.
