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Crude oil prices settled higher on Monday despite paring a substantial portion of early gains.
Oil prices rallied after Saudi Arabia, the world's largest crude exporter, pledged to cut its production by another 1 million barrels per day in July.
Saudi Arabia will reduce its output to 9 million bbl/day in July from about 10 million bbl/day in May, its largest cut in years.
A broader OPEC+ deal to limit supply into 2024, encouraging service sector activity data from China and the signing of a legislation by U.S. President Joe Biden to raise the nation's debt ceiling contributed as well to the rise in oil prices.
West Texas Intermediate Crude oil futures ended higher by $0.41 or about 0.6% at $72.15 a barrel, off the intra-day high of $75.06.
Brent crude futures were up $0.46 or 0.6% at $76.59 a barrel a little while ago.
After seven hours of talks, the Organization of the Petroleum Exporting Countries and its allies led by Russia, or OPEC+ have reached a deal to reduce overall production targets from 2024 by a further total of 1.4 million barrels per day (bpd).
The services sector in China continued to expand in May, and at a faster rate, the latest survey from Caixin revealed today with a services PMI score of 57.1, up from 56.4 in the previous month.
Edward Moya, Senior Market Analyst at OANDA says the Saudis are "basically giving up market share here and that strategy won't work over the long-term. The risk of more cuts seems unlikely given the market reaction, but also because the demand side of the equation should provide some stability for prices."
"The US economy is about to show a very robust summer travel season that should mean gasoline and jet fuel demand is going to be very strong. Oil might remain stuck in a trading range until we see evidence that China's recovery is improving," Moya adds.
