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Saudi urges Nigeria, others to further cut production and restore balance in global crude markets

…as it enacts deeper cut

As Nigeria struggles to save her economy already battered by the impact of coronavirus and falling oil prices, Saudi Arabia’s cabinet has urged OPEC+ countries to further reduce oil production rates to restore balance in global crude markets, state news agency (SPA) reported early on Wednesday.

“The cabinet affirmed the Kingdom of Saudi Arabia’s endeavor to support the stability of global oil markets,” according to a statement.

“The Kingdom of Saudi Arabia’s initiatives aim at urging the countries participating in the OPEC+ agreement and other producing countries to adhere to the cut rates and to provide more reduction in production in order to contribute to restoring the desired balance of the global oil markets.”

OPEC and its allies, a group known as OPEC+, decided in April to cut output by 9.7 million barrels per day (bpd) for May and June, a record reduction, in response to the 30percent drop in global fuel demand caused by the coronavirus pandemic.

Saudi Arabia said on Monday it would add to existing cuts by reducing output by another 1 million bpd next month — equivalent to 1percent of global oil supply — slashing total production to 7.5 million bpd, down nearly 40percent from April.

OPEC+ was expected to curtail that reduction to 8 million bpd, but sources told Reuters they instead expect the group to maintain the larger reduction.

The United Arab Emirates and Kuwait also committed to slashing an extra 180,000 bpd in total, adding to reductions the producers agreed to under a deal between OPEC and its allies.

“The idea that the Saudis and Kuwaitis and the UAE said that they’re going to enact deeper cuts than they initially agreed upon is helping the market find support,” said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut.

Kazakhstan has ordered producers in large and mid-sized oil fields to cut output by about 22percent in May to June, while output from Russia’s top oil region in western Siberia is expected to fall by 15percent this year, in line with the OPEC+ deal.

The U.S. Energy Information Administration (EIA)said it expects worldwide demand for oil to drop by 8.1 million bpd to 92.6 million bpd, a sharp revision from its previous report. It also cut its expectations for U.S. supply in 2020, now seeing a drop of 540,000 bpd to 11.69 million bpd, and said total world supply would be 95.2 million bpd.

The EIA said it expects worldwide demand for oil to drop by 8.1 million bpd to 92.6 million bpd, a sharp revision from its previous report. It also cut its expectations for U.S. supply in 2020, now seeing a drop of 540,000 bpd to 11.69 million bpd, and said total world supply would be 95.2 million bpd.

U.S. crude producing states have logged output cuts, as collapsing prices prompted independent and integrated producers to reduce operations. U.S. crude futures have lost roughly 60percent so far this year.

U.S. crude oil inventories rose last week while gasoline stocks fell, data from industry group the American Petroleum Institute showed.

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