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Oil held gains in early Asian trading after surging to a 10-month high on a surprise Saudi Arabian pledge to cut an extra 1 million barrels a day of crude output in February.

Futures in New York edged lower after jumping 4.9% on Tuesday and briefly topping $50 a barrel for the first time since February. OPEC+ reached an agreement following two days of talks to curb supply over the next two months. Other producers will hold supply steady or make small increases, delegates said. Russia and Kazakhstan will be allowed to boost output by a combined 75,000 barrels a day in both February and March.

The Saudi pledge, which Russia’s deputy prime minister described as a “new year gift” to the oil market, comes as stay-at-home orders and travel restrictions are being extended to rein in a rampant virus. Germany extended its lockdown and tightened restrictions, while Dalian in China asked people considered more vulnerable to Covid-19 to leave the city amid an outbreak.

OPEC+ faces a complex demand outlook as it decides how to move forward with its output plan month by month. There are indications that parts of the global economy are staging a comeback, with a gauge of U.S. manufacturing expanding last month at the fastest pace since 2018. But other areas of the demand recovery that had seemed constant are showing signs of wavering.

The Saudi pledge and the rally in prices may give the U.S. shale industry some room to begin snapping up market share, though financial hardships from the pandemic and investor expectations remain obstacles. It’s an especially sweet gift for U.S. shale drillers, said Helima Croft, chief commodities strategist at RBC Capital Markets analyst. Shale stocks subsequently surged.


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