Oil prices rose slightly upward as the Saudi Arabia announced that it is making significant supply cuts to its customers. Despite the announcement in the last month at Vienna, the OPEC and other members had been upping their supply to the Asian markets, where the demand was high.
However, according to a recent announcement, Saudi Arabia accompanied by Russia will decrease supply to countries substantially.
Saudi Arabia, the world's top oil exporter, is leading an effort by the Organization of the Petroleum Exporting Countries (OPEC) to cut production by almost 1.8 million barrels per day (bpd) until the end of the first quarter of 2018 in order to prop up prices. Other countries, including top producer Russia, are also participating.
Brent crude futures were at $48.42 per barrel at 0044 GMT, up 13 cents, or 0.3 percent, from their last close.
U.S. West Texas Intermediate (WTI) crude futures were at $46.21 per barrel, also up 13 cents, or 0.3 percent.
Despite the supply raises from US Shale producers, the prices are expected are rebound slightly in the wake of this announcement.
Prices also rose after the Energy Minister of Saudi Arabia informed market that the inventories in Saudi Arabia was declining and would do so substantially in the next few months.
Although other OPEC members, like Libya and Nigeria, are exempt from the cuts, and there have been doubts over the compliance of others, including Iraq, the club's supplies have been falling since the cut's start in January.
Trade data shows that OPEC shipments to customers averaged around 26 million bpd in the last six months of 2016, while they are set to average around 25.3 million bpd in the first half of this year.
Threatening to undermine OPEC's efforts to tighten the market is a relentless rise in U.S. drilling activity, which has driven up U.S. output by more than 10 percent since mid-2016, to over 9.3
The U.S. Energy Information Administration (EIA) says production will rise above 10 million bpd by next year, challenging top exporter Saudi Arabia.
Despite the supply cut announcement since last few years, the oil markets have been well supplied and continue to add to the glut that has been haunting the prices for the last year.