Oil prices jump as Saudi Arabia extends output cuts

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RIYADH — Saudi Arabia’s Minister of Energy Prince Abdulaziz said on Thursday the Kingdom was extending its voluntary 1 million barrel per day (bpd) oil production cut as he urged caution and vigilance at the start of a meeting of ministers of the OPEC+ alliance of oil producers on Thursday.

The Kingdom in coming months will decide when to gradually phase out the reduction, Prince Abdulaziz added.

We are not in a hurry to bring after the meeting, adding the decision for the voluntary cut would be taken “at our time, at our convenience.”

Consequent to the meeting, which decided to keep the production unchanged, oil prices surged to the highest in more than a year, signaling the potential of an even tighter market next month.

Brent crude, the global benchmark, jumped over 5 percent to around $65 per barrel while the prince was addressing the meeting, convened virtually to consider the future of global oil supply cuts and next crucial steps for global crude markets.

The meeting was convened with an anticipated rise in production levels in the face of a strong recovery in the oil price over the last month following the global launching of the vaccination campaign against the coronavirus pandemic.

While attributing the oil market recovery to the vaccine acceptance, Prince Abdulaziz said: “The recovery in oil demand depends on the speed of distribution of vaccines to prevent coronavirus, and how vaccines are distributed in countries of the world.”

While chairing the 14th meeting of OPEC and non-OPEC countries, the minister noted that the percentage of compliance among OPEC + members has achieved high figures, and the understanding between them is great.

“We learned from the past year the difficulty of predicting in an unexpected environment, and we stress the importance of caution and anticipation, especially as our efforts mitigated the impact of the three waves of the virus, the production cuts of the allied countries, and the voluntary reduction from Saudi Arabia by one million barrels per day in February and March,” he said while emphasizing that this has led to an acceleration of the market regaining its balance.

“All that we have achieved will not be wasted and our efforts will not be gone in vain. Before we take additional steps, let us make sure that the light we see on the horizon is not pseudo, and the right way now is to continue our efforts, and that we have contingency and backup plans in the event of the occurrence of any unexpected things,” he said.

The minister praised Nigeria’s efforts to complete the compensation schedule for increasing its production, expressing hope that compensation would be complete for the rest of the countries.

Oil surged to the highest in more than a year after the OPEC+ alliance surprised traders with its decision to keep production unchanged, signaling the potential of an even tighter market next month.

Futures climbed more than 5 percent in New York on Thursday to the highest intraday level since January 2020, while global benchmark Brent also jumped. By 15:57 GMT on Thursday, Brent crude futures were up $ 3.04, equivalent to 4.7 percent, to $ 67.11 a barrel, while US West Texas Intermediate crude increased $2.84 or 4.6 percent, to $64.12.

Crude has rebounded this year after the group and its allies slashed output to drive a rebalancing of the market following last year’s virus-induced slump. The aggressive supply management has helped to drain inventories, while worldwide demand is recovering with the roll-out of COVID-19 vaccines.

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