(Bloomberg) Oil touched a 10-month high above $50 a barrel after Saudi Arabia pledged to cut an extra 1 million barrels a day of crude output in February and March.Futures in New York added 0.9% after the kingdom’s surprise move drove prices up 4.9% on Tuesday. OPEC+’s agreement, which will see most producers keep output steady while the Saudis cut, prompted a sharp rally in the structure of the oil futures curve as traders anticipated lower supply in the coming months.The Saudi decision, which Russia’s deputy prime minister called a “new year gift” to the market, comes as governments enforce more stay-at-home orders and travel restrictions to curb a surge in virus infections. Goldman Sachs Group Inc. said the Saudi move reflects expectations for weaker oil demand, cutting its consumption forecasts for January and February.
OPEC+’s agreement diverges from earlier plans to add as much as 500,000 barrels a day to the market in February, underscoring the complex outlook. Still, 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.
Saudi Arabia’s output plan is “very bullish,” said Gary Ross, a veteran oil-market watcher and chief executive officer of Black Gold Investors LLC. “The worst of the virus is right now, and the impact on demand is nowhere near as bad as it was back in April.”
Prices
West Texas Intermediate for February delivery advanced 0.9% to $50.36 a barrel as of 10:40 a.m. London time
Brent for March settlement rose 1.4% to $54.36
The Saudi decision could be a boon to U.S. shale drillers, potentially giving them room to expand their market share, though financial hardships from the pandemic and investor expectations for returns remain obstacles. Shale stocks surged on Tuesday, and U.S. crude prices for the rest of the year settled at their highest level since February.
The deeper cuts came as a surprise to Asian oil refiners ahead of their expected receipt of cargoes for February in the coming days. Since the decision, the Middle Eastern Dubai benchmark has rallied sharply with nearby price gains outpacing those of later contracts.
Other oil-market news
Freezing weather that’s gripped large parts of the northern hemisphere is delivering a winter blessing for oil, gas and coal prices as suppliers meet a surge in heating demand.
Hin Leong Trading (Pte.) Ltd., under judicial managers from PricewaterhouseCoopers, made an application to freeze assets, shares and funds held by its founder Lim Oon Kuin and his two children as efforts to recoup $3.5 billion of debt from the collapsed oil trader continue.
The American Petroleum Institute reported that U.S. crude inventories fell by 1.66 million barrels last week, according to people familiar with the data. That would be the fourth straight weekly drop if confirmed by official figures due Wednesday. The API reported sharp jumps in gasoline and distillates stockpiles.
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