Oil prices are popping after Saudi Arabia vowed to cut production
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Crude oil futures spiked on Monday following reports Saudi Arabia would cut production levels in December.
The move was likely designed to stop the slide in crude prices which had fallen 20 per cent from early October — leaving them in a technical bear market.
“Saudi Arabia has stepped in front of the oil market bears proactively announcing they will reduce exports by 500,000 barrels per day in December,” said Stephen Innes, Head of Trading Asia-Pacific at OANDA.
Brent oil — the global benchmark — was up 1.7 per cent to $US71.36 at 4.30pm AEDT.
The US WTI benchmark was up 1.2 per cent to $US60.88 a barrel.
The likelihood of an official production cut from OPEC and its key allies at their December meeting is now increasing, say analysts at RBC Capital Markets.
“The odds of a cut next month seem fairly high and that it will likely be in the 1 million barrels per day range,” it said.
However, RBC Capital Markets said that key uncertainties remain, including how US President Donald Trump may react to attempts to boost prices.
“His twitter comments and back channel pressure played a pivotal role in prompting Saudi Arabia and its key OPEC allies to open the taps,” it said.
“Now that OPEC is showing clear signs of second thoughts, will he once again take to social media to forestall such a change or with the midterms in the rear view mirror, will he turn his attention elsewhere?”
We’ll likely find that answer out shortly, especially should crude prices continue to rally ahead of the December 6 meeting.