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Oil rises to 11-month high after Saudi Arabia pledges unilateral output cut

Commodities Jan 06, 2021 03:30AM ET
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TOKYO (Reuters) - Oil prices rose on Wednesday to their highest since February 2020 after Saudi Arabia agreed to reduce output more than expected in a meeting with allied producers, while industry figures showed U.S. crude stockpiles were down last week.

Brent crude rose as much as 0.9% to $54.09 a barrel, the highest since Feb. 26, 2020. It was at $53.82 a barrel at 0757 GMT after jumping 4.9% on Tuesday.

U.S. West Texas Intermediate (WTI) futures climbed as much as 0.6% to $50.24 a barrel, also the highest since Feb. 26, before slipping to $49.96. The contract on Tuesday closed up 4.6%.

Saudi Arabia, the world's biggest oil exporter, agreed on Tuesday to make additional, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March, after a meeting with the Organization of the Petroleum Exporting Countries (OPEC) and other major producers that form the group known as OPEC+.

The reductions agreed by Saudi Arabia were included in a deal to persuade other producers in the OPEC+ group to hold output steady.

With coronavirus infections spreading rapidly in many parts of the world producers are trying to support prices as demand takes a hit from new lockdowns being put in place.

"Despite this bullish supply agreement, we believe Saudi's decision likely reflects signs of weakening demand as lockdowns return," analysts from Goldman Sachs (NYSE:GS) said in a note, although the investment bank maintained its year-end 2021 forecast for Brent of $65 a barrel.

OPEC member Iran's seizure of a South Korean tanker in the Gulf on Monday also continued to support prices. Tehran denied it was holding the ship and its crew hostage after seizing the tanker while pushing for Seoul to release $7 billion of funds frozen under U.S. sanctions.

Meanwhile U.S. crude oil inventories dropped by 1.7 million barrels in the week to Jan. 1 to 491.3 million barrels, data from industry group the American Petroleum Institute showed late on Tuesday. That exceed analysts' expectations in a Reuters poll for a decline of 1.3 million barrels. [EIA/S] [API/S]

Oil rises to 11-month high after Saudi Arabia pledges unilateral output cut
 

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Comments (3)
Sree Charan
Sree Charan Jan 06, 2021 2:35AM ET
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Good job saudi
Gary SKY saw
Gary SKY saw Jan 06, 2021 1:54AM ET
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Once and for all.. Opec just peg the oil at 150 usd per barrel.. No need to do all kind of stunt.. Cut here cut there.. Just name your price and go flirting with all the women and enjoy life
perplexed76 .
perplexed76 . Jan 05, 2021 11:52PM ET
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i suspect they voluntarily reduce because they can't sell the same amount.
Chrismi Germain Regis
Chrismi Germain Regis Jan 05, 2021 11:52PM ET
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of course... btw just business
 
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