Oil steadied in Asia after surging to a 10-month high on Saudi Arabia’s pledge to cut an extra 1 million barrels a day of crude output in February and March as a rampant coronavirus leads to more lockdowns. Futures in New York traded near $50 a barrel after jumping 4.9% on Tuesday. OPEC+ reached a deal following two days of talks to curb supply over the next two months. The move by Saudi Arabia, the group’s de-facto leader, paved the way for other producers to keep supplies steady and for Russia and Kazakhstan to lift output by a combined 75,000 barrels a day in both February and March.
The kingdom’s pledge, which Russia’s deputy prime minister called a “new year gift” to the oil market, comes amid more stay-at-home orders and travel restrictions to rein in a surge of virus infections. Germany extended its lockdown, Japan reported a record number of daily cases and Dalian in China asked people more vulnerable to Covid-19 to leave the city amid an outbreak.
“The 1 million barrel per day reduction is nothing to scoff at and it will tip the market back into a supply deficit for the first quarter at least, even if demand is set to dip slightly on the new virus strain,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. “The message is now loud and clear that Saudi Arabia is there to guard the fragile equilibrium in this market.”
West Texas Intermediate for February delivery added 0.1% to $49.98 a barrel on the New York Mercantile Exchange as of 7:48 a.m. in London
Brent for March settlement rose 0.5% to $53.86 on the ICE Futures Europe exchange after closing up 4.9% on Tuesday