Oil on Friday posted the biggest weekly gain in New York since June after Saudi Arabia surprised the market with a significant supply cut beyond what was agreed to with fellow OPEC+ members.
West Texas Intermediate settled 1.3 percent higher after Saudi Arabian Minister of Energy Prince Abdulaziz bin Salman said that the country would continue its voluntary cut of 400,000 barrels per day.
That brings total cuts by OPEC and its allies to 2.1 million barrels per day, he said.
“The comments are what drove the market up,” Strategic Energy & Economic Research Inc president Michael Lynch said in Winchester, Massachusetts. “Total cuts are larger and substantially better than what the market was expecting.”
After the announcement, Abdulaziz predicted that Saudi Arabian Oil Co, which just completed an initial public offering at a valuation of US$1.7 trillion, would soon soar above US$2 trillion.
The kingdom plans to pump 9.7 million barrels per day, he said.
The additional supply reduction would take the kingdom’s production down to levels not seen on a sustained basis since 2014, data compiled by Bloomberg showed.
Still, prices surrendered some of their early gains after the initial surge.
“Investors have other concerns limiting the upside, including what will come of trade over the weekend,” said Rob Haworth, who helps oversee US$151 billion at US Bank Wealth Management.
While OPEC+ is taking 500,000 barrels per day out of the market, it is taking it out because demand is not there, he said.
“They were crowded out by non-OPEC output, like US output, so it should be a more bearish scenario for prices,” Haworth said.
West Texas Intermediate for delivery next month settled up US$0.77 to US$59.20 per barrel on the New York Mercantile Exchange, rising 7.3 percent for the week.
Brent for February settlement gained US$1 to US$64.39 per barrel on the London-based ICE Futures Europe Exchange, registering the largest weekly gain since late October.
The global benchmark traded at a US$5.29 premium to West Texas Intermediate for the same month.
In other energy trading, wholesale gasoline rose US$0.03 to US$1.65 per gallon and heating oil climbed US$0.02 to US$1.95 per gallon, while natural gas fell US$0.10 to US$2.33 per 1,000 cubic feet.
Gold fell US$17.80 to US$1,459.10 per ounce and silver fell US$0.46 to US$16.48 per ounce, while copper rose US$0.06 to US$2.71 per pound.
Additional reporting by AP
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