Oil Prices Edge Higher on Deep Saudi Arabia’s Output Cuts

•Nigeria records increased production in May

Emmanuel Addeh in Abuja

 Oil prices climbed over 1 per cent yesterday as Saudi Arabia’s plans for deep output cuts outweighed demand woes mainly stemming from rising United States fuel stocks and weak Chinese export data.

Nigeria’s price benchmark , Brent crude futures were up 99 cents, or 1.3 per cent, at $77.28 a barrel on the day, while US West Texas Intermediate (WTI) crude futures gained $1.10, or 1.1 per cent, to $72.84.

Both benchmarks jumped more than $1 on Monday after Saudi Arabia’s decision over the weekend to reduce output by 1 million barrels per day (bpd) to 9 million bpd in July.

United States crude stocks fell by about 450,000, according to data from the Energy Information Administration (EIA), compared with estimates for a 1 million build, Reuters reported.

China’s exports shrank much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish.

Wednesday’s data also showed that crude oil imports into China, the world’s largest oil importer, rose to their third-highest monthly level in May as refiners built up inventories.

A JP Morgan note showed forward crude cover in the country has climbed, indicating refiners have not increased processing rates but are instead storing oil.

Meanwhile, a Reuters survey has shown that OPEC oil output fell in May after Saudi Arabia and other members of the broader OPEC+ alliance made voluntary output cuts to support the market, even though Nigeria’s production increased by as much as 100,000 compared with April.

The Organisation of the Petroleum Exporting Countries (OPEC)  pumped 28.01 million barrels per day (bpd) during the month, the survey found, down 460,000 bpd from April. Output is down more than 1.5 million bpd from September.

Several members of OPEC+, which includes OPEC and allies such as Russia, in April pledged voluntary cuts on top of those made in late 2022 as the economic outlook worsened. Oil prices initially rose only to fall back as economic worries persisted.

For May, six OPEC members agreed to cut output by a further 1.04 million bpd, adding to about 1.27 million bpd of reductions already in place since late last year.

Month on month, production among the OPEC nations that are required to limit output fell by 540,000 bpd, the survey found.

According to the survey, compliance with all cuts fell to 137 per cent from 194 per cent in April. Output is still undershooting the targeted amount partly because Nigeria and Angola lack the capacity to pump as much as their agreed level.

The largest reductions came from OPEC’s Gulf producers Saudi Arabia, Kuwait and the United Arab Emirates, which largely implemented their voluntary cuts, the survey found.

Iraqi output edged up because of higher exports from the south of the country. But with exports from the north still shut down, Iraqi production was well below its allowed level.

Among countries with higher production, output from Nigeria and Angola posted gains. Exxon in late April resumed operations at its Nigerian sites after resolving a labour dispute.

Libya, Iran and Venezuela are the three producers exempt from OPEC cuts. All three managed to boost output in May, with Iranian exports in particular rising according to the survey.