WTI Price Forecast: Oil rises 1.5% as Saudi Arabia pledges deeper output cut

• WTI oil rises in Asia as major producers signal deeper cuts in June. 
• Saudi Arabia is willing to cut its output by further 1 million barrels per day.
• Renewed trade tensions could keep the black gold under pressure.

The US oil prices rose on Tuesday with Saudi Arabia unexpectedly pledging to deepen output cuts in June to help rebalance the market, which is currently grappling with the oversupply conditions caused by the coronavirus-induced demand destruction. 

At press time, West Texas Intermediate's front-month contract is trading at $24.50 per barrel, representing a 1.5% gain on the day. 

Saudi Arabia said on Monday that it would cut production by a deeper 1 million barrels per day in June and slash its total output to 7.5 million barrels per day. That would mark a 40% decline from April's total output. 

The United Arab Emirates and Kuwait also said they take out another 180,000 barrels per day of supply from the market. These output cuts will be in addition to the deal signed by OPEC+, a group of Saudi Arabia and Russia, in April to cut production by 9.7 million barrels per day. 

However, most observers think a big move higher in oil is unlikely to happen anytime soon, as demand is likely to remain weak due to the coronavirus-led economic downturn. 

Further, re-emergence of trade issues could keep the black gold under pressure. While President Trump is not in favor of renegotiating terms of the phase one trade deal agreed with China last year, tensions between Australia and China are rising with the latter imposing tariffs on former's top red meat abattoirs.

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