(Bloomberg) -- Oil rose as traders weighed Saudi Arabian and Russian production cuts after a slew of low-volume trading sessions.
The two OPEC+ linchpins announced their latest batch of curbs on Monday, with a supply-cut extension by Riyadh and a fresh pledge to reduce production from Moscow. Brent settled above $76 a barrel while WTI rallied, catching up with the global benchmark after a US holiday on Tuesday.
Brent's prompt spread — the gap between the two nearest contracts — is back in a bullish, backwardated structure. The move is in line with traders repricing their expectations for near-term inventory draws on the horizon, said Daniel Ghali, a commodity strategist at TD Securities.
“Speculative short covering has likely provided some support to prices, but fundamentally our gauge of supply risk is printing its highest levels year-to-date,” Ghali said. “Saudi Arabia's decision to rollover its voluntary production cuts and Russia's decision to curtail exports, as opposed to production, are the fundamental factors contributing to recent gains.”
The UAE won't be joining voluntary oil cuts at this time, the country's energy minister said. Saudi Energy Minister Prince Abdulaziz bin Salman said Russia's latest oil cut is meaningful as it will affect exports.
Crude has slumped this year amid China's stuttering economic recovery and after central banks in the US and Europe raised rates to quell inflation, jeopardizing energy demand.
There have also been pockets of fundamental strength in recent days. Kazakhstan's CPC crude has faced disruption as a result of power outages in the country. Separately, one refiner in Germany is limiting diesel supplies, a sign of regional supply tightness.
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