Saudi Energy Minister Khalid al-Falih said the country’s crude production from January to March will be “well below” output caps.
Oil hit a two-and-a-half-week high on Monday (February 26) on the back of strong US demand and comments from Saudi Arabia that it will stay in line with OPEC-led efforts to curb production.
Oil prices have gained more than 7 percent over the past two weeks, following a more than 12-percent selloff earlier in the month due to fears of surging US shale production.
Brent crude rose 20 cents to $67.51 per barrel and US West Texas Intermediate futures had climbed 41 cents as of 11:35 a.m. EST, with both contracts reaching their highest increase since February 7.
These upticks were supported by comments from Saudi Energy Minister Khalid al-Falih, who announced on Saturday (February 24) that the country’s crude production from January to March will be well below output caps, with exports averaging less than 7 million barrels per day.
OPEC and its allies, including Russia, have been withholding crude output by 1.8 million barrels a day since the start of 2017. The agreement helped bolster crude prices by more than 50 percent in the second half of last year.
With those numbers in mind, Saudi Arabia hopes that once the current deal to cut supply ends this year, OPEC will be able to relax output curbs next year and create a permanent structure in order to stabilize oil markets.
Falih stated, “[a] study is taking place and once we know exactly what balancing the market will entail, we will announce what is the next step. The next step may be easing of the production constraints.”
But some experts believe that the possibility of an eventual end to production cuts may create a bearish market longer term.
Also aiding oil’s upswing was a decision from Libya’s national oil company to declare force majeure on the country’s el-Feel oil field on Friday (February 23). The field, which produces 60,000 barrels a day, was shut down and evacuated following a violent protest by a unit of local guards.
On Monday, WTI crude prices settled at $63.89, while Brent crude ended at $67.50.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.