Oil tanks at an oil processing facility of Saudi Aramco, a Saudi Arabian state-owned oil and gas company, at the Abqaiq oil field.

Stanislav Krasilnikov | TASS via Getty Images

Oil prices jumped to their highs of the day after Saudi Arabia said it will cut production further in an effort to support global oil markets.

Beginning on June 1 the Kingdom will cut output by an additional 1 million bpd, which combined with the cuts agreed to by OPEC and its oil-producing allies, brings Saudi Arabia’s total cut to roughly 4.8 million bpd below its April record production level. Production for June will now be 7.492 million bpd.

After initially bouncing on the announcement, oil prices were little changed. West Texas Intermediate, the U.S. benchmark, traded 5 cents lower at $24.69. Earlier in the session it traded as high as $25.28, and as low as $23.67. International benchmark Brent crude fell 21 cents to trade at $30.73 per barrel.

Saudi Arabia also said that it would scale back May production “in consent with its customers.”

“The Kingdom aims through this additional cut to encourage OPEC+ participants, as well as other producing countries, to comply with the production cuts they have committed to, and to provide additional voluntary cuts, in an effort to support the stability of global oil markets,” a statement from the Saudi press agency said.

Oil is coming off its second straight positive week as investors have cheered signs that demand recovery is underway amid ongoing production cuts. WTI jumped 25% last week in one of its best weeks in history, while Brent rose 17%.

Still, prices are well below their highs and the path to recovery is far from certain. 

“Despite the production curtailments that commenced this month, traders start to realize that the size of the supply-demand imbalance leaves little room for optimism,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy. “Storages in the US continue to fill up with crude and we are coming closer to tank tops by the day.”

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