Yesterday, Saudi Arabia made an announcement regarding the extension of its unilateral oil production cut for an additional month. The country will continue reducing oil production by 1 million barrels per day until August, with the possibility of further extensions, as stated by the Saudi Press Agency.
This decision aims to support the price of oil, with Saudi Arabia expected to pump around 9 million barrels per day, according to Bloomberg.
Concurrently, Russian Deputy Prime Minister Novak declared that Russia would reduce oil exports by 500,000 barrels per day in August.
Like previous production cut announcements this year, the market response to these policy updates followed a familiar pattern: an initial rally in oil prices, followed by a subsequent decline. Initially, the price of Brent crude surged to USD 76.60 per barrel, but it retraced to USD 75.00 per barrel, like its pre-announcement level.
Despite various production cuts announced in recent months, the price of oil remains close to year-to-date lows. These measures have, at best, provided some stabilization at lower price levels. However, commodity analysts anticipate that tightening supply and demand conditions will support a rebound in oil prices during the second half of this year.
Over the past month, oil-related currencies have shown mixed performance. The Norwegian krone (+3.6% against USD) and the Canadian dollar (+2.5%) have been the top performing G10 currencies since the end of May. This appreciation is primarily attributed to the hawkish repricing of rate hike expectations by the Norges Bank and the Bank of Canada.
Market commentary and analysis from Luca Santos, currency analyst at ACY Securities
