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.

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“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.

“Oil prices above $US80 are never welcome by OPEC customers, and that seems to be a similar consensus among OPEC, non-OPEC and US producers.
“However, producers are concerned that the latest selling frenzy could see Brent oil reach $US60 or below. So, it’s in OPEC’s best interest to tame the current supply glut.”

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.

Brent oil, the global benchmark price, bounced today after hitting a seven-month low at the weekend.
Brent oil, the global benchmark price, bounced today after hitting a seven-month low at the weekend.

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.


This article first appeared on Business Insider Australia, Australia’s most popular business news website. Read the original article. Follow Business Insider on Facebook or Twitter.