Saudi Arabia announced its plans to voluntarily reduce one million barrels per day (bpd) of production in February and March. Credit: C Morrison from Pixabay.

Oil prices increase after Saudi Arabia unilaterally agreed to reduce production over the next two months and a drop has been reported in US crude inventories.

Brent crude increased by $0.40, or 0.7%, to reach at $54.70 a barrel by 05:12 GMT while US West Texas Intermediate (WTI) grew $0.43, or 0.9%, to touch $51.06, a barrel, reported Reuters.

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The world’s largest oil exporter, Saudi Arabia announced its plans to voluntarily reduce one million barrels per day (Mbpd) of production in February and March, at a meeting with OPEC+ earlier this week.

Reuters also reported that is not immediately known how the swarming of the supporters of President Donald Trump to US Capitol will impact oil markets, although some analysts consider that President-elect Joe Biden’s administration will reduce US oil production.

OANDA senior market analyst was quoted by the news agency as saying: “WTI crude seems poised to rise higher as the Biden administration will clamp down on US crude production, the Saudis tentatively alleviated oversupply concerns with their 1Mbpd cut present, and as the dollar’s days seem numbered.”

Crude inventories were down by eight million barrels in the week to 1 January to 485.5 million barrels.

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According to analysts, a sustained rise in WTI prices is likely to lead to a resurgence in US production.

StoneX energy market analyst Kevin Solomon said: “If the US benchmark makes a sustained break above $50/bbl and beyond, it could encourage additional US supply, which may be troublesome in the long run for many OPEC+ members.”

Meanwhile, Trump supporters stormed the US Capitol, pushing it into lockdown, as US Vice-President Mike Pence declined a demand from Trump to cancel his loss to President-elect Joe Biden. According to the police, the situation is under control and secure.