Saudi Arabia plans to increase its oil output in the coming months, reversing a recent big production cut, say advisers to the Kingdom, a sign of growing confidence over an oil-price recovery. The world’s largest oil exporter surprised oil markets last month when it said it would unilaterally slash 1 million barrels a day of crude production in February and March in an effort to raise prices.
But the Kingdom plans to announce a reversal of those cuts when a coalition of oil producers meet next month, the advisers said, in light of the recent recovery in prices. The output rise won’t kick in until April, given the Saudis already have committed to stick to cuts through March. The advisers cautioned the plans still could be reversed if circumstances change, and the Saudis’ intention hasn’t yet been communicated to the Organization of the Petroleum Exporting Countries, said the people and OPEC delegates.
Oil prices this week returned to levels not seen since the Covid-19 pandemic erupted early 2020, devastating oil demand globally. Brent crude, the international oil benchmark, has hit $64 a barrel, while West Texas Intermediate, the main grade of U.S. crude, crossed $60.
However, oil prices shed all their daily gains Wednesday on news of the Saudi plan to restore supplies, with Brent falling 0.1% to $63.33 and WTI futures down 0.8% at $59.55 a barrel.
But they regained momentum after the American Petroleum Institute registered a sharp drop in inventories of crude oil in the U.S. in the latest week. Brent closed at $64.85 a barrel, up 2.4% and WTI ended up 2.7% at $61.66 a barrel.
Prices have been steadily recovering in recent months as several Western countries make progress with vaccination programs, boosting hopes of an economic recovery later in the year. Analysts also point to evidence of a pickup in oil demand in China and India, and improvement in mobility and employment in the U.S.