Oil Surges As Saudi Arabia & Russia Extend Production Cuts

Oil Cuts ExtendedCrude prices broke out to yet further new highs for the year yesterday. The move was driven by news that Saudi Arabia and Russia have extended their additional production cuts through year-end. On top of the production cuts agreed among OPEC+ members, the two producers undertook additional, voluntary cuts which totalled around 1.5% of daily global supply. The cuts, which were initially extended through October have now been extended further and reflect the two producers’ commitment to underpinning prices.Market Fundamentals TighteningComing on the back of a string of recent, large US inventories drawdowns, this action is expected to help tighten the market further. US demand has been overtaking supply recently, creating the heavy deficits we’ve seen in recent API and EIA data. Last week saw a huge 10.6 million barrel drawdown reported by the EIA. This week’s data will be released tomorrow instead of today as a result of the Labour Day holiday on Monday in the US. On the back of this latest action, crude prices look likely to remain firm near-term, shrugging off a stronger US Dollar.Technical ViewsCrudeThe rally in crude has seen the market breaking out convincingly above the 82.59 level following a false break in early August. With momentum studies now bullish, the focus is on a further push higher while price holds above the 82.59 level, targeting a move up to 93.47 next.