WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange reversed higher in overnight trade, bolstered by coordinated supply cuts from Mideast Gulf producers Saudi Arabia, Kuwait, and United Arab Emirates that were announced on Monday add. The cuts total an additional 1.18 million barrels per day (bpd) decline in their daily output to expedite a market rebalance.
Kuwait and United Arab Emirates became the latest countries to join a Saudi initiative to reduce supplies deeper than spelled out in an April 12 agreement with 23 countries to offset a plunge in global oil demand. Both Gulf producers pledged a combined 180,000 bpd reduction above their June quota, adding to a 1 million bpd voluntary cut committed by Saudi Arabia on Monday. The new curtailments will lower Kuwaiti output to 2.09 million bpd in June from an agreed-to cut of 2.17 million bpd under the April deal between the Organization of the Petroleum Exporting Countries and 10 partners. After targeted and voluntary curbs, United Arab Emirates will pump 2.35 million bpd in June after production cuts.
Saudi Arabia, the largest contributor to voluntary supply curtailments, will deepen its production cut in June to 4.8 million bpd from a record high 11.3 million bpd April output rate.
Sources indicate Russian oil production is down 1.85 million bpd from its April's level of 11.35 million bpd, although still 650,000 bpd short of its agreed quota under the OPEC+ deal. The deal by OPEC+ to reduce supplies by 9.7 million bpd came into effect May 1.
The market will be closely watching the compliance rate of OPEC+ countries in the coming weeks for indication of how fast the group reduces their supplies in accordance with their agreement. OPEC will release its monthly market outlook Wednesday with updates on individual country's production rate for April.
In early trading, NYMEX West Texas Intermediate for June delivery advanced $1.35 to $25.48 bbl and the Brent contract gained $0.94 to trade above $30 bbl after falling as much as 4% session prior. NYMEX June ULSD futures moved higher 2.18 cents to $0.8897 gallon and the June RBOB contact traded near $0.9409 gallon, edging off Monday's eight-week spot high at $0.9820 gallon.
Later Tuesday, the market will turn focus to production curtailments by U.S. producers, with the latest monthly outlook due for release 12 p.m. EDT by Energy Information Administration. The latest forecast called for a reduction of 1.4 million bpd in 2020 for an annualized rate of 11.8 million bpd. However, latest data indicates domestic producers cut deeper and faster than previously expected.
Continental Resources, which operates the Bakken Shale across North Dakota and Montana, said Monday it has cut 70% of its May oil output, more than double what it had planned earlier. Another shale producer, Callon, announced this week it has suspended its full-year outlook and said it has halted all completion activity in April and moving to only one active drilling rig by mid-May.
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