Oil tops $50 as Saudi pledges to cut production next month

Bloomberg

Oil breached $50 a barrel as Saudi Arabia pledged a voluntary oil-production cut next month, while most of the Opec+ alliance agreed to hold its production steady.
Futures in New York rose as much as 5.1%, topping $50 a barrel for the first time since February before easing off the high. Saudi Arabia didn’t provide a volume on the cut, according to a delegate, but a “surprise” was expected in a press conference later on Tuesday. The move resolves an impasse between the kingdom and Russia, which was pushing for an increase.
“We’re basically at pre-Covid price levels now,” said Bob Yawger, head of the futures division at Mizuho Securities. “You’re probably going to get some new speculators to jump in, who were just waiting for that big whole number to be breached.”
Opec+ faces a complex demand outlook as the group decides on how to move forward with its output plan month by month. There are signs that parts of the world’s economies are staging a comeback, with a measure of US manufacturing expanding last month at the fastest pace since 2018.
But other areas of the demand recovery that had seemed constant are showing some signs of wavering.
Several Asian refiners won’t be getting into long-term supply contracts for fuel sales this year, a sign the region’s energy
consumption recovery is far from certain. “Raising production while many key regions enter renewed lockdowns was a tough sell for Russia but at the same time holding back production at these price levels will be just as difficult,” said Ryan Fitzmaurice, commodities strategist at Rabobank.
Moscow and Riyadh’s initial positions in the Opec+ supply talks were diametrically opposed, with Saudi Arabia pushing to rescind the 500,000-barrel a day supply increase this month. Russia wanting a hike of the same amount, delegates said. The Saudis later indicated rolling over current output levels into February would be acceptable. Moscow appears to be outnumbered but the alliance requires consensus before concluding talks.
In the US, expectations are for crude inventories to fall this week following three straight weeks of declines, according to a Bloomberg survey. The industry-funded American Petroleum Institute was expected to report its figures later Tuesday ahead of US government data.