Oil Prices Jump After Saudi Announces Output Cuts As Asian Shares Rise

After mixed U.S. employment data, most Asian shares rose on Monday, June 5, on expectations that the Federal Reserve may delay rate increases this month. Oil prices soared after Saudi Arabia vowed significant supply cutbacks.

An Oil Price Hike

While U.S. crude increased 1.2% to $72.61 per barrel after reaching a session high of $75.06, Brent oil rose 1% to $76.89 per barrel, giving up some of its previous gains to as high as $78.73.

They surged when Saudi Arabia indicated it would reduce output to 9 million barrels per day in July, down from over 10 million bpd in May, the most significant fall in years—meanwhile, an OPEC+ agreement to cap supplies until 2024 also supported futures.

On Monday, the Nikkei rose 1.7% to surpass 32,000 for the first time since July 1990, while MSCI’s broadest index of Asia-Pacific equities ex-Japan rose 0.2%. The Hang Seng index in Hong Kong increased by 0.6%, but China’s bluechips underperformed, falling by 0.4%.

A Mixed U.S. Report

Data released on Friday revealed that the U.S. economy generated 339,000 jobs last month, above most predictions. Despite this, markets continued to bet on the Fed not changing interest rates this month, with a 75% possibility factored in.

According to the Reuters report, if U.S. inflation stays high, there is a 70% chance that the Fed funds rate will increase to 5.25–5.5% or higher at the policy meeting in July. In contrast, markets now believe there is minimal probability of a rate drop before the end of this year.

Despite the debt accord, Fitch Ratings predicted that the United States “AAA” credit rating would remain on negative watch.

After rising by 0.5% on Friday in response to the employment news, the U.S. dollar was trading at 104.11 against the major currencies on Monday.

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