LONDON: Oil rose on Thursday as tighter supply resulting from Saudi Arabia’s pledged production cut and a potential pause to U.S. interest rate hikes offset worries over demand weakness and a global economic slowdown.

At an OPEC+ meeting on Sunday, Saudi Arabia said it will cut its crude output by 1 million barrels per day (bpd) in July on top of a broader deal to limit supply into 2024 as the producer group seeks to boost flagging prices.

Brent crude rose 62 cents, or 0.8%, to $77.57 a barrel by 1217 GMT. U.S. West Texas Intermediate crude gained 68 cents, or 0.9%, to $73.21.

“With the OPEC+ meeting out of the way, focus is now shifting towards the next move the Fed will make when it meets next week,” said Tamas Varga of oil broker PVM.

There is growing consensus that the central bank will skip a rate hike, which could lift oil prices even before falling supply starts draining global oil inventories, Varga added.

Oil falls as economic fears overshadow Saudi output cut

Economists polled by Reuters expect that the U.S. Federal Reserve will not raise interest rates at its June 13-14 meeting. But a significant minority expects at least one more increase this year.

Still, a surprise rate increase in Canada gave investors their second reminder of the week that the surge in global interest rates is not done yet.

“Oil prices have been attempting to recover lately,” said IG market strategist Yeap Jun Rong. “But it has been a struggle.”

The U.S dollar was slightly weaker on Thursday, making oil cheaper for buyers holding other currencies.

Both oil benchmarks settled up about 1% on Wednesday, supported by the Saudi plan, though gains remained capped by rising U.S. fuel stocks and weak Chinese economic data.

A larger than expected rise in U.S. gasoline inventories raised concern over demand while U.S. crude stockpiles registered a small decline of 451,000 barrels.