Brent Crude futures gained 1.73% to $77.45 a barrel, after touching a session high of $78.73, while the US West Texas Intermediate crude climbed 1.87% to $73.08, after hitting an intraday high of $75.06. Both contracts had jumped 2% on Friday.

Saudi Arabia said it would reduce its output to 9 million bpd in July from about 10 million bpd in May. This production is on top of a broader deal by the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia to limit supply into 2024 as the OPEC producer group seeks to boost flagging Oil Prices, Reuters reported.

Read here: OPEC+ to lower production targets from 2024 by 1.4 mln bpd; Saudi to cut output in July

The OPEC+ reached a deal on output policy and decided to reduce overall production targets from 2024 by a further total of 1.4 million barrels per day (bpd).

Consultancy Rystad Energy said the additional Saudi cut is likely to deepen the market deficit to more than 3 million bpd in July, which could push prices higher in the coming weeks, Reuters reported.

Meanwhile, analysts expect the upside for the oil prices to be capped amid demand concerns. 

“The concerns over slowing demand in the US and China still prevail. Along with this, strength in US dollar will keep upside in crude oil prices capped,” said Ajay Kedia, Director, Kedia Advisory.

Kedia expects Brent oil to face resistance at $79-79.50 levels, while resistance for WTI crude may be seen at $75 a barrel. Support for theBrent oil is seen at $73 per barrel and for WTI crude is likely to be at the level of $68.50 per barrel.

Saudi Arabia, OPEC cartel’s dominant member, will make deep production cuts of 1 million bpd starting from July, as part of a broader output-limiting OPEC+ deal. The other OPEC producers agreed to extend earlier cuts in supply through the end of 2024.

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In April, the oil producing group had announced a surprise production cut of 1.16 million bpd.

OPEC+ pumps around 40% of the world’s crude has cut its output target by a total of 3.66 million bpd, amounting to 3.6% of global demand.

On the domestic front, MCX crude oil prices were trading 2.18% higher at ₹6,045 level. 

Kedia expects depreciating rupee will further aid oil prices in the domestic market, but believes upside remains capped.

“On MCX, crude oil may face resistance at ₹6,350 level, while support is placed at ₹5,720 level,” Kedia said.

(With inputs from Reuters)

Updated: 05 Jun 2023, 04:14 PM IST