Oil was jolted higher by efforts around the globe to support prices as Saudi Arabia and Russia extended their pact to manage the market and Canada’s largest producing province ordered unprecedented output curbs.
After their worst month in a decade, prices in New York and London yesterday advanced more than 5 percent.
Although Moscow and Riyadh have yet to confirm any fresh cuts, the agreement by the Russian and Saudi leaders over the weekend opened the door for a deal at the OPEC meeting this week in Vienna.
Alberta’s decision to curtail production by 325,000 barrels a day put a rocket under oil’s rally, which largely ignored Qatar’s surprise announcement that it would leave OPEC to focus on natural gas.
“We may see prices recovering to US$60 a barrel this month and depending on how much and until when OPEC’s output curbs will continue, we might be heading toward US$70,” Sungchil Will Yun, Seoul-based commodity analyst at HI Investment & Futures, said by telephone. “Canada’s production cuts are adding to the bullish sentiment in the oil market, removing concerns of oversupply that has so far been dampening prices.”
West Texas Intermediate for January delivery climbed as much as US$2.92, or 5.7 percent, to US$53.85 a barrel on the New York Mercantile Exchange, its biggest intraday gain since June.
Brent for February settlement rose as much as 5.3 percent to US$62.60 a barrel on London’s ICE Futures Europe exchange.
OPEC president and Emirati Minister of Energy Suhail Al Mazrouei said that he was optimistic that OPEC and its allies will reach an agreement in Vienna over a cut in production for next year.
Technical teams were working on the level of the cuts necessary and the reference baseline for the reduction, he said.
Alberta’s unprecedented curbs, announced on Sunday, are an effort to ease a crisis in the nation’s energy industry.
The province is to reduce production of raw crude and bitumen by 8.7 percent starting next month until the levels of excess oil in storage are drawn down.
The reduction would then drop to 95,000 barrels a day until the end of next year at the latest.
The amount being cut is more than the total production of each of OPEC’s three smallest members: Equatorial Guinea, Gabon and the Republic of the Congo.
“It’s always more impactful when everyone joins the fray,” said Stephen Innes, head of Asia-Pacific trading at Oanda Corp. “It definitely highlights just how critical a supply cut at this juncture is needed to stop oil prices for plummeting. It’s a bullish setup all around.”
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