Saudi Aramco cuts to Asia sees oil prices rally
Saudi Aramco's decision to reduce oil supplies to Asia has seen prices rally again after recent declines.
The Saudi oil giant made a decision to cut oil supplies to the Asian market in June by around 7 million barrels, a source told Reuters, as part of a wider OPEC agreement to help buoy prices.
The amount is said to be equal two days' oil imports to Japan, Asia's second biggest economy, and marks another break from Saudi Arabia's usual policy of maintaining customers by keeping supplies steady.
The impact was immediately felt with a 19 cent rise on Brent futures LCOc1 after months of price rallies and declines.
A pick up in US oil production has contributed to the imbalance in the market but there were signs last week that American crude inventories had fallen.
"Chief among (the) oil market's worries is that the renewed rise in US oil production is reducing the speed at which the supply surplus is being eroded," said Fawad Razaqzada, market analyst at Forex.com told Reuters.
Oil cartel OPEC are due to meet later this month, which could see an agreement to sustain oil cuts to help raise falling prices.
Saudi Arabia's Energy Minister Khalid al-Falih has already said Riyadh might agree to extending the cuts.
Many oil producers in the region have been badly hit by low prices with many turning to bonds and loans to make up for revenue losses.
There has been speculation that after suffering continued budget shortfalls Bahrain could turn to Saudi Arabia for financial assistance.
Oil prices have plummeted from around $100 a barrel in 2014 to less than $50 now after a spike US shale oil production.