LONDON (Reuters) – Oil prices rose on Monday, recovering earlier losses on news that leading exporter Saudi Arabia will reduce its output by 1 million barrels per day (bpd) on top of reductions agreed under an OPEC+ supply pact.
FILE PHOTO: The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019. Picture taken November 24, 2019. REUTERS/Angus Mordant/File Photo
Brent crude was up 19 cents, or almost 1%, at $31.16 a barrel by 1216 GMT, while U.S. West Texas Intermediate crude rose 38 cents, or 1.5%, to $25.12. Both contracts had fallen more than $1 earlier in the session.
Global oil demand has slumped by about 30% as the coronavirus pandemic has curtailed movement across the world, leading to growing inventories globally.
To reduce the oversupply the Organization of the Petroleum Exporting Countries (OPEC) and allied producers – a grouping known as OPEC+ – agreed to cut production from May 1 by about 10 million bpd in an effort to support prices.
On Monday a Saudi energy ministry official said that the ministry has directed national oil company Saudi Aramco to reduce its crude oil production for June by an extra 1 million bpd.
Oil prices had fallen earlier in the session on signs of a second wave of coronavirus infections after Wuhan, the epicentre of the outbreak in China, reported its first cluster of infections since the city’s lockdown was lifted a month ago.
New coronavirus infections are accelerating in Germany only days after it loosened social restrictions, raising concerns that the pandemic could again slip out of control. South Korea also warned of a second wave of the virus on Sunday.
Fears that the United States is running out of oil storage space sent WTI prices into negative territory last month, prompting some U.S. producers to rein in output.
The number of operating oil and gas rigs in the world’s largest oil producer fell to 374 in the week to May 8, a record low according to data going back to 1940 from energy services company Baker Hughes Co.
Both benchmarks have notched gains over the past two weeks, supported by a modest rebound in demand as some travel restrictions are eased.
Graphic: Turning off the taps – here
Reporting by Bozorgmehr Sharafedin in London; Additional reporting by Florence Tan in Singapore and Devika Krishna Kumar in New York; Editing by David Goodman