Oil-producing countries have agreed to continued cuts in production in a bid to shore up flagging prices.
Saudi Arabia said it would make cuts of a million barrels per day (bpd) in July and Opec+ said targets would drop by a further 1.4 million bpd from 2024.
Opec+ accounts for around 40% of the world’s crude oil and its decisions can have a major impact on oil prices.
Average diesel prices fell by a record 12p per litre in the UK last month, according to the RAC.
In Asia morning trade on Monday, Brent crude oil futures rose by more than 2% to around $78 a barrel.
The seven hour-long meeting on Sunday of the oil-rich nations, led by Russia, came against a backdrop of falling energy prices.
Total production cuts, which Opec+ has undertaken since October 2022, reached 3.66 million bpd, according to Russian Deputy Prime Minister Alexander Novak.
Opec+, a formulation which refers to the Organization of Petroleum Exporting Countries and its allies, had already agreed to cut production by two million bpd, about 2% of global demand.
“The result of the discussions was the extension of the deal until the end of 2024,” Mr Novak said.
In April, it also agreed a surprise voluntary cut of 1.6 million bpd which took effect in May, a move that briefly saw an increase in prices but failed to bring about a lasting recovery.
On Sunday, Saudi Energy Minister Prince Abdulaziz bin Salman said the cut of one million bpd could be extended beyond July if needed. “This is a Saudi lollipop,” he said, in what is seen as a bid to stabilise the market.
Before the two-day Opec+ meeting started, it was widely expected the oil cartel would make production cuts to prop up prices. It appears most members were against the idea, as any cuts would impact oil revenues, which are crucial to keep running their economies.
Saudi Arabia’s decision to make a voluntary reduction of one-million barrels per day was unexpected but does not come as a huge surprise. As the leader of the pack, and also the largest exporter of oil, it was the only one in a position to be able to lower output.
From Riyadh’s point of view, it is crucial the price of crude remains over $80 a barrel for it to break even. Saudi officials want elevated prices to keep spending billions of dollars on ambitious projects spearheaded by Crown Prince Mohammed bin Salman, as he tries to diversify the kingdom’s economy away from oil.
The move by the Saudis also underlines the uncertain outlook for demand for fuels in the months to come. Concerns about the global economy, especially recessionary fears in the US and Europe are expected to put further pressure on crude prices.