Oil surges as Saudis eye deeper cuts and non-OPEC joins deal
Oil jumped to the highest since July 2015 after Saudi Arabia signaled it’s ready to cut output more than earlier agreed and non-OPEC countries including Russia pledged to pump less next year.
Futures rose as much as 5.8 per cent in New York and 6.6 per cent in London. Saudi Energy Minister Khalid Al-Falih said Saturday the biggest crude exporter will “cut substantially to be below” the target agreed last month with members of OPEC. His comments followed a deal by 11 non-OPEC countries including Mexico to join forces with the group and trim output by 558,000 barrels a day next year, the first pact between the rivals in 15 years.
U.S. oil futures have gained about 20 per cent since the Organization of Petroleum Exporting Countries agreed on Nov. 30 to cut output for the first time in eight years. Saudi Arabia, which initiated OPEC’s decision in 2014 to pump without limits, is leading efforts to take back control of the market. The OPEC and non-OPEC plan encompasses countries that supply 60 per cent of the world’s crude, but excludes major producers such as the U.S., China, Canada and Brazil.
“This signals Saudi Arabia aims to hasten the oil-market rebalancing,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. It’s “likely to trigger oil-inventory drawdowns at the start of 2017.”
West Texas Intermediate for January delivery rose as much as US$3.01 to US$54.51 a barrel on the New York Mercantile Exchange, the highest level since July 2015. The contract was trading at US$53.89 at 9:57 a.m. in London. Prices gained 3.5 per cent over the previous two sessions to close at US$51.50 a barrel on Friday.