Oil jumped on Tuesday to its highest level since November as top producers Saudi Arabia and Russia announced that they will extend their supply cuts.
Brent, the benchmark for two-thirds of the world’s oil, rose 1.54 per cent to $90.52 a barrel at 5.20pm UAE time to its highest since November last year.
West Texas Intermediate, the gauge that tracks US crude, was trading 1.99 per cent higher at $87.25 per barrel.
The kingdom, Opec’s top oil producer, will extend its voluntary oil cut of one million barrels per day for another three months until the end of December, state-run Saudi Press Agency reported on Tuesday.
The kingdom began implementing the cut in July, and it was later extended to include August and September.
"In effect, the kingdom’s production for the coming months of October, November and December will be approximately 9 million barrels per day," the SPA cited an official source from the Ministry of Energy as saying.
The decision will be reviewed monthly to consider deepening the cut or increasing production, the report added.
The latest cut by the kingdom is in addition to the voluntary cut previously announced in April, which extends until the end of December 2024.
The move seeks to "reinforce the precautionary efforts made by Opec+ countries with the aim of supporting the stability and balance of oil markets", SPA cited the source as saying.
Meanwhile, Russia, the world’s second-largest oil exporter, will also extend its voluntary cut in oil exports by 300,000 bpd until the end of the year, the country's Deputy Prime Minister Alexander Novak said on Tuesday.
The move is aimed at maintaining "stability and balance" in the oil markets, he said.
Russia has already pledged to reduce its production by 500,000 bpd until the end of 2024.
"Opec+ wants to remain in control of the oil market. Hence, the voluntary extra cuts will be reviewed monthly and could be deepened or reduced depending on market conditions," UBS strategist Giovanni Staunovo said in a research note.
"We remain positive on oil."
Saudi Arabia’s crude exports stood at 5.47 million bpd in the first 27 days of August, the lowest level since April 2021, UBS said last week, quoting Petro-Logistics data.
The Swiss lender remains bullish on prospects of oil continuing its march higher, predicting Brent will rise to $95 a barrel by the end of this year.
At its August meeting, producers group Opec+ agreed to keep to its current output policy.
The alliance of 23 oil-producing countries has total production cuts in place of 3.66 million bpd, which includes a two million bpd reduction agreed on last year as well as voluntary cuts of 1.66 million bpd announced in April.
The tightening in the market comes amid concerns about a demand slump due to weak economic growth in China, the world's top oil importer.
China's services activity grew at the slowest pace in eight months in August amid weak demand, a private sector report said on Tuesday.
The Caixin/S&P Global services purchasing managers' index (PMI) slipped to 51.8 last month from 54.1 in July, indicating a softer expansion in the country’s service sector output.
The PMI highlights that the country's economy is "struggling from both weak internal and external demand", said Craig Erlam, senior market analyst at Oanda.
"Measures to support the economy have been limited and targeted so far and there’s little to suggest that approach is going to change in the foreseeable future," he said.