Saudi Arabia’s pledge to cut its oil output by more than required under its pact with other OPEC+ producers points to weakening oil demand following new COVID-19 lockdowns and sets the stage for a tighter market in the second quarter, Goldman Sachs said in a note released on Tuesday.
“Saudi’s action and the prospect for a tight market in 2Q21, as the rebound in demand stresses the ability to restart production, will likely support prices in coming weeks, leading us to reiterate our bullish oil view,” the analysts wrote.
Benchmark Brent oil prices on Wednesday hit their highest level since February after Saudi Arabia, the world’s biggest oil exporter, said that it would cut by an additional, voluntary 1 million barrels per day in February and March.
Two OPEC+ members — Russia and Kazakhstan — will bump up their output by a combined 75,000 barrels per day, while other producers will hold production steady.
Producers are wary of the impact of new lockdowns on oil demand.
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