Crude Rises as New Saudi Energy Minister Vows to Maintain Reduced Output

But the analytical community still warns of bearish market until 2020: File Image/Pixabay

As far as crude traders were concerned, the notion of Saudi Arabia lowering its production output was enough to offset the usual concerns about the U.S./China trade war and the perception of weakening global oil demand - and as a result, crude prices on Monday rose about 2 percent.

Brent  gained $1.05, or 1.7 percent, to settle at $62.59 per barrel, while West Texas Intermediate rose $1.33, or 2.4 percent, to settle at $57.85 per barrel.

The gains came after Prince Abdulaziz bin Salman, the new energy minister for the Saudis, stated that the pillars of his kingdom's policy would not change and a global deal to cut oil production by 1.2 million barrels per day (bpd) would survive; he was referring to the Organization of the Petroleum Exporting Countries' (OPEC) cutback deal, recently extended to help ensure a better balance between supply and demand.

Jim Ritterbusch, president of Ritterbusch and Associates, said in a note that the announcement of a change in leadership within the Saudi oil ministry "was accompanied by strong suggestions that production restraint would continue until the market achieves a better balance."

But despite Monday's gains, analysts were careful not to derive anything significant from it, having witnessed too many instances over the past few months of prices suddenly rising and then falling just as unexpectedly, usually based on the vaguest of fears or hope.

Indeed, on Monday Ben Luckock, co-head of oil for global commodities trader Trafigura, said he remained bearish on the oil price until the year end due to a global economic slowdown, the U.S.-China trade war, and increased U.S. output.

He remarked, "The flat price had the best it's going have this year, we're bearish until year end; IMO will hopefully help us with recovery through 2020" - a reference to a new lower cap on sulfur content in shipping fuel set by the International Maritime Organization.

As for the Saudis' pledge to keep output in line, experts suggested that the outcome of this initiative may be negligible.

Dan Brouillette, U.S. deputy energy secretary, told CNBC on Monday that ″[Abdulaziz] has got a very tough road ahead of him, I must say: U.S. production will continue to go up all throughout 2019 and certainly to 2020."

If nothing else, Abdulaziz demonstrated on Monday that he has a sense of humour - and retains a healthy dose of skepticism when it comes to the seemingly endless warnings about decreased oil demand.

He told reporters that he was "by nature an optimist" and that the "jury is out" when it comes to the outlook for demand, adding that if he took International Energy Agency projections forecasting slowing demand seriously, he would "probably be on Prozac all the time."