Oil prices experienced a $1 increase per barrel on Monday following Saudi Arabia's commitment to further reduce its production by 1 million barrels per day (bpd) starting in July. This move aimed to counteract the negative effects of macroeconomic factors that have weighed down the market.

Brent crude futures rose by $1.02, or 1.3%, reaching $77.15 per barrel at 0645 GMT, with a session-high of $78.73 per barrel. Similarly, U.S. West Texas Intermediate crude climbed by $1.02, or 1.4%, to $72.76 per barrel, after hitting an intraday high of $75.06 per barrel.

Following the announcement from the Saudi energy ministry that the country's output would decrease to 9 million bpd in July from around 10 million bpd in May, the contracts extended their gains of over 2% from Friday. This production cut is Saudi Arabia's most significant reduction in years.

The voluntary cut pledged by Saudi Arabia is an addition to the broader agreement made by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, to limit supply until 2024. The group aims to boost oil prices, and currently, they have implemented cuts amounting to 3.66 million bpd, equivalent to 3.6% of global demand.

"Saudi remains keener than most other members in terms of ensuring oil prices above $80 per barrel, which is essential for balancing its own fiscal budget for the year," noted Suvro Sarkar, leader of the energy sector team at DBS Bank. He also highlighted Saudi Arabia's determination to take proactive measures to counter potential macroeconomic concerns affecting demand.

Rystad Energy, a consultancy firm, predicted that Saudi Arabia's additional cut would deepen the market deficit to over 3 million bpd in July, potentially leading to higher prices in the coming weeks.

Goldman Sachs analysts regarded the meeting as "moderately bullish" for oil markets, estimating that it could raise December 2023 Brent prices by $1 to $6 per barrel, depending on how long Saudi Arabia maintains its output at 9 million bpd over the next six months.

However, many of the production reductions agreed upon by OPEC+ will have limited real impact, as the revised targets for countries like Russia, Nigeria, and Angola simply align with their actual production levels. According to Sarkar, this adjustment mainly represents a reduction on paper to reflect the ongoing lower production levels compared to existing targets in certain OPEC countries.

In contrast, the United Arab Emirates (UAE) was allowed to increase its output targets by 200,000 bpd to 3.22 million bpd in order to alleviate concerns about its potential departure from OPEC.

Meanwhile, in the United States, the oil rig count dropped by 15 to 555 last week, the lowest since April 2022, as reported in Baker Hughes Co's weekly report on Friday. The decrease in drilling activity in the U.S. can be attributed to lower prices, higher costs, and companies redirecting their spending towards repaying shareholders since December.