Oil Prices Rally 2% as Supply Cuts Made by OPEC Deepen

Oil Prices Rally 2% as Supply Cuts Made by OPEC Deepen

Image: Offshore oil rig.

On Tuesday, oil prices rallied, after OPEC decided on significantly reducing supply, making good on its latest deal to curb production and stave off a global glut in supplies.

WTI and Brent Oil Rose Sharply on Tuesday

U.S. West Texas Intermediate crude futures for March delivery on the New York Mercantile Exchange jumped $1.38, or around 2.6%, to $53.78 a barrel by 8:20AM ET (13:20 GMT).

Brent oil for April delivery rose $1.51, or about 2.4%, to $63.01 a barrel on the ICE Futures Exchange in London.

OPEC’s Monthly Report in Short

Image: OPEC flag.

In its closely watched monthly report, the Organization of the Petroleum Exporting Countries said its oil production had fallen by 797,000 barrels a day in January to 30.81 million barrels per day (bpd).

The bulk of the cuts were shouldered by Saudi Arabia, the world's top oil exporter and de facto leader of OPEC.

The kingdom pumped about 10.2 million bpd in January, down 350,000 bpd from December and Riyadh will continue to cut production, reducing output to about 9.8 million bpd in March, Saudi Energy Minister Khalid al-Falih told the Financial Times in an article published on Tuesday.

In December, OPEC and a group of 10 producers outside the cartel, led by Russia, agreed to collectively cut production by a total of 1.2 million bpd during the first six months of 2019.

Oil's gains also came as appetite for riskier assets improved after lawmakers reached a tentative deal to avert another partial U.S. government shutdown and the U.S. and China expressed optimism about their ongoing trade talks.

Market players also looked ahead to the release of fresh weekly data on U.S. commercial crude inventories. The American Petroleum Institute is due to release its weekly report for the week ended Jan. 25 at 4:30PM ET (21:30 GMT). The U.S. Energy Information Administration's weekly report will be released on Wednesday.

In other energy trading, gasoline futures climbed 2.6% to $1.455 a gallon, while heating oil added 1.5% to $1.921 a gallon. Natural gas futures tacked on 1.3% to $2.678 per million British thermal units

Sources: Ft.com, Investing.com, Reuters.com, Bloomberg.com, BusinessInsider.com.

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