New York: Oil prices rose by more than 1 percent on Monday after the world's top exporter Saudi Arabia pledged to cut production by a further 1 million barrels per day (bpd) from July to counter macroeconomic headwinds that have depressed markets.Brent crude futures were up $1.23, or 1.6 percent, at $77.36 a barrel by 1712 GMT after touching a session high of $78.73. U.S. West Texas Intermediate crude gained by $1.11, or 1.6 percent, to $72.85 after hitting an intraday high of $75.06.
Both contracts extended gains of more than 2% on Friday after the Saudi energy ministry said the kingdom's output would drop to 9 million bpd in July from about 10 million bpd in May. The cut is Saudi Arabia's biggest in years.
The voluntary cut is on top of a broader deal by the Organization of the Petroleum Exporting Countries (OPEC) and producers including Russia to limit supply into 2024 as the OPEC+ group seeks to boost flagging oil prices.
Fatih Birol, head of the International Energy Agency (IEA), on Monday said that the chance of higher oil prices had increased sharply after the new OPEC+ deal. OPEC+ pumps about 40 percent of the world's crude and has cut its output target by a total of 3.66 million bpd, amounting to 3.6 percent of global demand.
"The market is still trying to assess the impact of what the Saudi production cut actually means," said Phil Flynn, an analyst at Price Futures Group. "Oil seems to be taking the news as very bullish, and it is." SEB analyst Bjarne Schieldrop said the market reaction on Monday was relatively muted after the previous cut by OPEC+ failed to prop up prices for long.