EG: Crude Oil Futures Hit 16-Week High on News of Saudi Output Cut
--Intraday price hits highest level since Sept. 18
--Saudis cut output 5% in December as OPEC agreed to restraints
--China oil import jump, Yemen pipeline blast lend support
By David Bird
NEW YORK--Crude oil futures prices climbed to a 16-week high on Thursday on news that Saudi Arabia, the world's largest oil exporter, cut production in December.
Light, sweet crude oil futures for February delivery on the New York Mercantile Exchange were 90 cents higher, at $94 a barrel, after trading to a high of $94.70 a barrel. ICE North Sea Brent crude oil was up 78 cents, at $112.54 a barrel.
The kingdom, which is the de facto leader of the Organization of the Petroleum Exporting Countries, reduced output by 5% in December from a month earlier to 9.025 million barrels a day, a person familiar with the matter told Dow Jones Newswires. The Saudis supplied customers some 9.151 million barrels a day of oil in the month, the person said, suggesting some deliveries were met by drawing oil from storage.
The drop was the largest percentage cut by the Saudis since January 2009, when U.S. benchmark oil prices collapsed to $42 a barrel during the recession. It hit a record monthly average of $134 a barrel in June 2008.
The new Saudi cut came as OPEC agreed in December to hold its output at 30 million barrels a day, meaning a cut of about 1 million barrels a day by members was needed.
Analysts said the move by the Saudis, if sustained, could tighten the supply/demand outlook for the market, which implies a need for OPEC output cuts to avoid a big rise in inventories or declines in prices.
Matt Smith, analyst at Summit Energy, said the Saudi news "put the fire in the belly of this rally," which came as crude prices have been anchored near $93 a barrel amid modest daily price movements.
Prices also were supported by news that a bombing on a pipeline in Yemen had halted flows on the 120,000 barrels a day export line. Also in the mix was data showing crude oil imports in China, the second-biggest oil consumer after the U.S., gained 8% in December from a year earlier.
The Saudi output figure is about 500,000 barrels a day below the estimate for the month published by the U.S. Energy Information Administration. The EIA on Tuesday said it sees Brent crude falling $7 to an average of $105 a barrel this year in a market characterized by rising non-OPEC output, led by a surging U.S. production, outpacing the growth in global oil demand. The EIA sees OPEC cutting output by an average of about 600,000 barrels a day in 2013, to 30.3 million barrels a day.
February-delivery heating oil rose 2.29 cents to $3.0928 a gallon, while reformulated gasoline blendstock futures for February delivery were 1.64 cents higher, at $2.7953 a gallon.
