Oil futures rose in Asian trading on Wednesday after Reuters reported Saudi Arabia would cut supplies to the region as oil cartel Opec battles against rising US output that is threatening to derail its attempts to end a sustained global glut in crude.
State-owned Saudi Aramco would reduce oil supply to Asian customers by about 7-million barrels in June, a source told Reuters, as part of Opec’s agreement to reduce production and as it trimmed exports to meet rising domestic demand for power during the summer.
Seven-million barrels is about two days of oil imports into Japan, the world’s fourth-biggest importer. Aramco had previously been maintaining supplies to its important Asian customers.
Global benchmark Brent futures were up 25c, or 0.5%, at $48.98 a barrel at 2am GMT. They fell 1.2% on Tuesday.
US West Texas Intermediate (WTI) crude was up 29c, or 0.6%, at $46.17 a barrel. It also fell 1.2% the previous session, and the closing price for both contracts on Tuesday was the second lowest since November 29, the day before Opec agreed to cut production during the first half of 2017.
While prices surged immediately after the agreement, in recent weeks they have come under sustained pressure as US production has ramped up.
Many are now pushing back the expected timing for when the oil market will come into balance after prices began slumping nearly three years ago.
“Chief among [the] oil market’s worries is that the renewed rise in US oil production is reducing the speed at which the supply surplus is being eroded,” Fawad Razaqzada, market analyst at Forex.com, said in a note.
Saudi Arabia’s oil minister Khalid al-Falih said on Monday that he expected the output deal to be extended to the end of the year or possibly longer. Opec meets later in May.
US crude production is expected to rise by more than previously expected in 2017 to 9.31-million barrels a day from 8.87-million barrels a day in 2016, a 440,000 barrels a day increase, the US Energy Information Administration said.