Oil prices rise as Saudi Arabia pledges further supply cut

By Sonali Paul
MELBOURNE, May 12 (Reuters) - Oil futures climbed in early
trade on Tuesday, boosted by an unexpected commitment from Saudi
Arabia to deepen production cuts in June to help drain the glut
in the global market that has grown as the coronavirus pandemic
crushed fuel demand.
Brent crude LCOc1 futures climbed to a high of $30.11 a
barrel and were up 0.9%, or 28 cents, at $29.91 at 0021 GMT,
clawing back some of the previous session's losses. The
benchmark fell $1.34 on Monday.
U.S. West Texas Intermediate (WTI) crude CLc1 futures were
up 1%, or 24 cents, at $24.38 after touching a high of $24.77.
Saudi Arabia said overnight it would cut production by a
further 1 million barrels per day (bpd) in June, slashing its
total production to 7.5 million bpd, down nearly 40% from April.
"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," Stephen Innes, chief global market
strategist at AxiCorp, said in a note. OPEC+ is a grouping
comprising members of the Organization of the Petroleum
Exporting Countries (OPEC) and other producers including Russia.
The United Arab Emirates and Kuwait also committed to cut
production further, promising to cut another 180,000 bpd
altogether. Those cuts, combined with the world's biggest economies
relaxing coronavirus restrictions and stoking a gradual recovery
in fuel demand, are expected to ease some pressure on crude
storage capacity.
However, in the wake of new outbreaks of the coronavirus,
including in China and South Korea, the market is wary of a
second wave of COVID-19 cases that could result in new lockdowns
and stall a recovery in demand.
Inventory data this week will be key to extending the recent
rally in oil prices, AxiCorp's Innes said.
"The majority of traders' top-line view is that inventories
will increase at a slower pace but will still build, capping oil
prices in the medium term," he said.
U.S. crude inventories likely rose by about 4.3 million
barrels in the week to May 8, a preliminary Reuters poll showed,
ahead of reports from the American Petroleum Institute industry
group on Tuesday and the U.S. Energy Information Administration
on Wednesday. Meanwhile six analysts polled estimated that gasoline
stockpiles fell by 2.3 million barrels, down for a third
straight week.