Oil prices continued the upward trend on Thursday with Brent nearing the $55 per barrel mark on the back of Saudi Arabia’s pledge to voluntarily cut output by an extra 1 million barrels a day over the next two months. The fall in crude U.S. crude stockpiles further contributed to higher oil prices.
In addition to this, the violence in Washington as supporters of US President Donald Trump stormed into the US Capitol also added to the rise in crude futures.
The March contract of Brent on the Intercontinental Exchange (ICE) was at $54.70 a bbl, higher by 0.74 per cent from its previous close.
Similarly, WTI crude was trading above the $51 per barrel mark. The February contract of WTI crude on the NYMEX was trading at $51.10 per barrel, higher by 0.93 per cent.
The world’s largest oil exporter’s voluntary decision to reduce an additional 1 million barrel per day (bpd) of production in February and March above its current quota of oil production came after the meeting of Organization of the Petroleum Exporting Countries (OPEC) and its allies ended.
Experts believe that Saudi’s pledge to reduce its output, paired with the rise in prices may give the US-based shale industry enough room to begin grabbing up the market share.
The meeting had concluded with a solution upon which all OPEC+ members agreed to lift oil production by 75,000 barrels per day over January levels.
Further, decline in the crude stockpiles in the US also lifted oil futures.
As per Energy Information Administration’s data, crude inventories in the US declined 8 million barrel last week to 485.5 million barrels.
“Crude oil prices gained with rally in equities, bullish inventory data and expectations of tighter supply. Saudi Arabia surprised the market with its pledge to cut 1 million barrel per day of output in February and March,” said Tapan Patel, Senior Analyst (Commodities), HDFC Securities.