Brent Crude hit $65 a barrel early on Friday, reaching the highest price so far this year and the highest level since November, as larger-than-expected cuts from Saudi Arabia and OPEC’s resolve to rebalance the market outweighed concerns over slowing global economy this week.
At 10:20 a.m. EST on Friday, WTI Crude was trading up 1.60 percent at $55.27. Brent Crude was up 1.44 percent at $65.50.
At the start of the week, Saudi Arabia signaled to the market that it would be over-delivering its share of the OPEC+ production cuts, fueling a rally in oil prices. In an interview with the Financial Times published on Tuesday, Saudi Arabia’s Energy Minister Khalid al-Falih said that the Saudis would cut production to around 9.8 million bpd in March, some 500,000 bpd below the commitment in the OPEC+ deal that began in January.
OPEC’s monthly report on Tuesday showed that total OPEC production in January—the start of the new cuts—dropped by 797,000 bpd to average 30.81 million bpd. Saudi Arabia cut production by 350,000 bpd from December bpd to 10.213 million bpd in January, and its Arab Gulf allies Kuwait and the United Arab Emirates (UAE) also reduced output substantially.
Oil prices continued rising early on Wednesday, also supported by Tuesday’s report of the American Petroleum Institute (API) which showed a small crude oil inventory draw of 998,000 barrels for the week ending February 8, compared to analyst expectations that predicted a build in crude oil inventories to the tune of 2.300 million barrels.
The EIA inventory report later on Wednesday showed a crude oil inventory build of 3.6 million barrels. Yet, oil prices continued to rise as investors were focused on the OPEC and Saudi cuts and on optimism that the ongoing U.S.-China trade talks could result in some sort of a deal.
On Friday, oil prices were also supported by reports of a partial closure at Saudi Arabia’s huge offshore oil field Safaniyah, whose production capacity is 1.2 million bpd of Arab Heavy oil.
By Tsvetana Paraskova for Oilprice.com
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