Brent and Crude Oil jump after Saudi production cuts
- Oil is trading higher after an OPEC production meeting
- US Oil and UK Oil are up 5.22 and 5.44 per cent respectively
- A Saudi Arabian production cut of 1 million barrels per day lifted prices
The price of Oil has jumped over five per cent on the 5th of January 2021, following an extended meeting by the Organization of Petroleum Exporting Companies (OPEC). The meeting went against expectations where all member nations agreed on the same solution. Initially, OPEC had agreed on Tuesday to increase daily oil production by 75,000 barrels per day for both February and March. A late press release by Saudi Arabia updated announced that they would in fact cut production by 1 million barrels per day over the same period. Comparatively, Russia and Kazakhstan will instead increase production.
Off the back of this news, the price of West Texas Intermediate and Brent Crude jumped 5.22 and 5.44 per cent respectively. Since November, both measures have rocketed over 47 per cent, after spending the most part of 2020 in complete turmoil or consolidating around $40 per barrel. As of the 6th of January 2020, both UK and US Oil are $53.54 and $49.75 per barrel. Local producers have followed suit, Beach Energy (ASX: BPT) and Oil Search (ASX: OSH) are currently up 4.7 and 5.4 per cent respectively at 11:45am on the 6th of January 2021.
For the most part of 2020, both Saudi Arabi and Russia have been at odd’s with how to manage global Oil production. Russia’s continual refusal to cut production in order to maintain steady oil prices. Russia has pushed once again to increase production and decided upon a 125,000 barrel per day increase. Russian officials argued that too severe cuts by OPEC would risk losing market share to US producers. Oil is Russia largest export market.
Oil’s recent moves higher have been supported by OPEC latest meeting, however, where Saudi Energy Minister Abdulaziz bin Salman said that the decision was made, “with the purpose of supporting our economy, the economies of our friends and colleagues, the OPEC-plus countries, for the betterment of the industry.”
A Saudi cut of this size and a statement of this kind provided confidence to commodity markets that there is a general commitment to keep Oil prices buoyant in the near term. Macroeconomically as COVID-19 cases soar and the distribution of Vaccines has not met expectations the speed of an economic recovery may be hampered. A statement released by OPEC directly said that “rising infections, the return of stricter lockdown measures and growing uncertainties have resulted in a more fragile economic recovery that is expected to carry over into 2021.”
Moving forward, the Oil production will see Saudi cuts, and Russian and Kazakhstani increases for January, February and March. Though sentiment moving forward remains positive, the focus will be on OPEC meeting’s moving the price of Oil as demand remains’ steadily low.
More for you
ARB Corporation Releases Positive Trading Update
- 12 January 2021