Nigeria’s flagship crude, Bonny light, rose by 1.20% to stand at $25.23 per barrel, according to the latest data released by oilprice.com as oil traders became more optimistic about oil production cuts.
Similarly, Brent crude gained about 3.37% to trade at $30.63 as at 1 pm Nigerian time on Tuesday. The slight increase was boosted by a recent pledge by the Saudis to further cut oil production in June.
The deeper output cut is intended to help reduce the oil glut in the global market, which had occurred as a result of COVID-19’s negative impact on fuel demand.
Saudi Arabia announced overnight that it would reduce oil production by another 1 million barrels per day starting next month, thereby bringing its total oil production to 7.5 million barrels per day.
While commenting on Saudi Arabia’s latest output announcement, the Chief Global Market Strategist at AxiCorp, Stephen Innes, said this to Reuters:
“This reduction in production provided excellent optics encouraging other OPEC + members to comply and even offer additional voluntary cuts, which should quicken the global oil markets’ rebalancing act.”
Previously, there were concerns surrounding the need for further oil production cuts by American oil producers and OPEC+ (a group that includes the Russians, OPEC, and other friendly oil-producing countries).
Also recall that fears that America was running out of storage tanks had triggered a plunge in U.S. crude oil prices, causing it to tank into negative territory in April. The development had prompt most American oil producers to reduce oil production.