Oil Rallies After Saudi Arabia and Russia Announce Supply Curbs

(Bloomberg) — Oil traded above $76 a barrel a day after OPEC+ linchpins Saudi Arabia and Russia agreed to prop up prices by curbing supply.

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Brent climbed about 2% in London, though volumes were subdued due to the July 4 holiday in the US. In a flurry of announcements Monday, Saudi Arabia said it will prolong a unilateral 1 million barrel-a-day supply reduction into August, while Russia declared a cut in exports and output. Algeria planned to make more modest curbs.

Russia will reduce oil exports by 500,000 barrels a day in August and aims to lower production by the same amount, Deputy Prime Minister Alexander Novak said. Algeria will reduce output by 20,000 barrels a day next month. So far this year, Moscow has been slow to comply with previously agreed cutbacks amid pressure to keep funds flowing for its war against Ukraine.

Saudi Arabia announced its initial 1 million barrel-a-day reduction for July on June 4. Oil prices have failed to rise since then, with Brent crude little changed in the past month.

“The fact that markets hadn’t responded as the Saudi energy ministry had anticipated raised concerns that they would not extend that cut,” TD Securities analyst Daniel Ghali said by phone. Monday’s decision “signals that, even though prices have not recovered immediately, Saudi Arabia remains committed to its decision to keep oil prices from falling further.”

Crude prices are also running up against a major technical hurdle. Brent futures pierced their 50-day moving average on Monday, but failed to close above that level. They’ve generally struggled to move far beyond that marker since prices became rangebound in late April.

However, in a more bullish signal in the futures curve, Brent’s nearest timespread closed at its strongest level in about a month on Monday, indicating expectations of tighter supply.

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