Oil rose in Asian trade on Wednesday after rising more than 1% in the previous session amid market concerns over supply shortages after Saudi Arabia and Russia extended voluntary supply cuts until the end of the year.
Brent crude futures were up 14 cents to $90.18 a barrel as of 02:15 GMT. West Texas Intermediate crude oil (WTI) futures were up 12 cents at $86.81 a barrel.
Investors expected Saudi Arabia and Russia to extend the voluntary cuts until October, but a three-month extension was not expected. These bullish moves tighten the global oil market significantly and we see higher oil prices around the world.
The impact of these cuts on inflation and economic policy in the West is difficult to predict, but higher oil prices raise the possibility of further fiscal tightening to curb inflation, particularly in the US.
Reflecting near-term supply concerns, front-month Brent futures were trading near 9-month highs at $4.10 a barrel, above six-month prices.
For WTI futures, the spread between the front-month and the six-month contract widened to as much as $4.47 a barrel on Wednesday, also hovering near 9-month highs.
Citing an energy ministry official on Tuesday, Saudi Arabia will extend its 1 million barrels per day (bpd) voluntary oil production cut for another three months until the end of December 2023.
Russia has extended its voluntary decision to reduce oil exports by 300,000 barrels per day until the end of this year, Deputy Prime Minister Alexander Novak said on Tuesday.
The Saudi and Russian voluntary cuts are on top of the April cut agreed by several OPEC+ producers, which extends to the end of 2024.
Both countries will review their cut decisions monthly to consider deepening cuts or increasing production depending on market conditions.
The decision to extend production cuts underlines the commitment to price stability in a challenging market environment.
However, the impact of the annual refinery maintenance period from September to October in the US on crude oil demand and potentially rising oil prices should not be overlooked.
