Oil prices hit 11-month high as Saudi’s agree to increased output cuts

Oil prices have reached an 11-month high after Saudi Arabia agreed to reduce its output by more than expected in a meeting between OPEC and other key oil producing countries.

Brent crude rose by over 5% following the news of Saudi Arabia’s pledge to cut production by an additional 1 million barrels per day in February and March. The trading price of Brent crude reached US$54.09 per barrel – its highest since just before the first COVID-19 lockdowns were implemented last year.

Oil prices subsequently crumbled to historic lows after lockdowns to prevent the spread of the virus around the world destroyed fuel demand for several months.

“Saudi Arabia put the cherry on the cake and if there is one way to describe what its voluntary cut means for the market, ‘happy hour’ is a pretty fitting term,” said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.

OPEC and its oil producing allies (collectively known as OPEC+) agreed a deal which will see most producers holding output steady during February and March, as the cartel seeks to protect prices amid concerns that new COVID-19 lockdowns will hit demand.

An internal OPEC+ document seen by Reuters highlighted the bearish risks facing the market, while Saudi Energy Minister Prince Abdulaziz bin Salman urged caution, noting still fragile fuel demand and the unpredictable impact of new variants of COVID-19.