Crude oil prices were volatile this week as investors were clued into the ongoing developments on production cuts. Crude oil prices hit a fresh 8-week high last Wednesday as expectations of continued drawdown amid Saudi Arabia's commitment to limit production saw investors bid up oil prices.

The WTI crude oil futures rose $0.46 or about 1% while Brent crude oil futures rose $0.36 or 0.7%. The gains came after Brent oil futures rallied 3% on Tuesday.

Saudi Arabia to limit exports to 6.6 million bpd

Oil markets were boosted by the announcement from Saudi officials following the meeting of the OPEC and non-OPEC members on Monday last week. The official announcement said that Saudi Arabia would limit crude oil exports to 6.6 million barrels per day (bpd) in August, down from one million bpd a year ago.

The commitment to limit the exports increased the expectations of further drawdown in oil inventories. More importantly, Nigeria (along with Libya) which was exempt from the oil production cuts was said to have agreed to rein in production. The country is expected to limit its oil output around 1.8 million bpd.

However, the question remains as to when Nigeria will be able to reach the 1.8 million bpd production mark. Currently, the nation produces oil at a lower volume.

Al-Falih calls for more stringent checks from OPEC nations

OPEC also said that it would be more stringent with the output limits. The organization said that it was contemplating a crackdown on member nations that are not adhering to the output caps.

In July, OPEC production was seen rising to 33 million bpd, making it close to the record levels seen in 2016. Saudi's energy minister Khalid al-Falih said, "We are not doing this to allow other countries to free ride and undercut the agreement by overproducing," in reference to some OPEC nations that had increased production.

Saudi export cut: More of a domestic issue?

After announcing the extra limits to exports, al-Falih said that he wanted other oil producing nations to follow suit. However, some oil experts pointed out that the Saudi's decision to limit exports further was due to other reasons.

Michael Tran from RBC Capital markets explained that in summer times, Saudi's tend to export less oil as domestic consumption increases on account of the harsh summer. The cooling systems, Tran said require a lot more energy during these periods.

Furthermore, Tran said that the outages from two major oilfields added more pressure.

Despite the positive developments, crude oil futures failed to push past the $50 mark. At the same time, Anadarko Petroleum Corp also released an announcement noting that it would cut the 2017 capital budget by $300 million.

The oil company said that this was because of weaker oil prices. The announcement from Anadarko marks the first U.S. oil producer to do so after the company posted larger than expected quarterly losses.

EIA Crude oil inventory report: Four consecutive weekly declines

On Wednesday last week, the Energy Information Administration (EIA) released the weekly crude oil inventory report. According to official data, crude oil stockpiles for commercial use fell for the fourth consecutive week.

Crude Oil Inventory Report: 7.2 million bpd decline for week ending July 21, 2017

The data showed that domestic crude oil stockpiles fell 7.2 million barrels per day (bpd) for the week ending July 21. This was more than the expectations of a 2.5 million decline in inventory. Earlier on Tuesday, the American Petroleum Institute (API) showed a larger decline of 10.2 million bpd.

Combining the rhetoric from OPEC and the weekly inventory report, oil prices rallied to a new 2-month high. Crude oil futures rose to settle on Wednesday at $48.75 a barrel, while the Brent oil futures rose to $50.97 as a result.

If the oil price continues to post gains, there could be hopes that inflation could continue to return to the uptrend, especially in the US.