Oil prices hit 11-month high on Saudi oil cut

Oil prices on Wednesday touched its highest level since February on the back of  Saudi Arabia’s production cut and United States (US) crude inventory decline.

Brent crude, the international benchmark, surged 88 cents, at 1.7 per cent, to $54.48 a barrel as at afternoon.

Earlier in the session, it hit a high of $54.63 a barrel, a level not seen since February 26, 2020.

U.S. West Texas Intermediate (WTI) futures spiked 75 cents, at 1.5 per cent, to $50.68 a barrel. The contract touched $50.71 a barrel, its highest since Feb. 25, 2020.

Saudi Arabia, the world’s biggest oil exporter, said on Tuesday that it would reduce crude oil production, for the upcoming months of February and March by an extra voluntary amount of one million barrels per day.

This means that the kingdom’s production for the two months after both its targeted and voluntary production cuts will be 8.119 million per day.

With coronavirus infections spreading rapidly, producers are wary of a further hit to demand.

OPEC+ agreed most producers would hold output steady in February and March while allowing Russia and Kazakhstan to raise output by a modest 75,000 bpd in February and a further 75,000 bpd in March.

Oil prices have been on a tear in recent weeks following the roll out of COVID-19 vaccine raising hope of a quick recovery.

This is good news for Nigeria as crude oil accounts for half of the government’s income and about 90 percent of Nigeria’s foreign exchange earnings.

The nation’s economy has continued to battle foreign exchange scarcity following plummeting crude oil prices in the international market caused by the COVID-19 pandemic.