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WTI Extends Gains After Saudis Unilaterally Slash Production By 1MM B/D

Courtesy of ZeroHedge View original post here.

Update (1310ET): In a quite shocking update, the Saudi minister just confirmed the size of their unilateral cuts… and it’s a huge surprise.

Saudi Arabia to make voluntary cut of 1 million barrels a day, for February and March, taking its output to 8.1 million barrels a day.

Prince Abdulaziz said of the cut:

“We do that willingly.”

“We will support the market, we will support the industry,”

As Bloomberg’s Julian Lee notes, aside from the one month of June last year, when The Kingdom made a similar voluntary cut of 1 million barrels a day, this will take Saudi Arabia’s production to its lowest level since 2009.

That lifted WTI back above $50…but again it did not hold…

*  *  *

Amid winks, nods, and rumors, WTI Crude futures have just surged back above $50 for the first time since February after OPEC+ appears to have agreed on a small crude output hike in February.

As Reza Zandi reports, OPEC+ will increase the current level of production by only 75 thousand bpd instead of 500 thousand bpd.

It appears that the increase will apply to Russia (+65k b/d) and Kazakhstan (+10k b/d). That’s half the increase they would have been allowed if the overall target had been raised by 500,000 barrels a day, as the Russians wanted. That would have given Russia an extra 131,000 barrels a day and Kazakhstan 20,000 barrels.

Additionally, delegates claim that the Saudis plan to make voluntary output cuts in February (rumored to be 400k+ b/d), which is quite a shocking signal of The Kingdom’s determination to “re-balance” the oil market.

WTI extended its earlier gains on the Saudi surprise, topping $50 briefly…

Bloomberg’s Javier Blas reports that Saudi Arabia has not disclosed to other OPEC+ countries the size of its voluntary output cut – and we must emphasize, this is so far an offer. Riyadh has yet to announce it formally.

Saudi Energy Minister Prince Abdulaziz bin Salman may use the OPEC+ press conference to confirm the plan, and disclose the volume.

Bloomberg’s Julian Lee raises an important point in noting that this is starting to look like absolute desperation to keep Russia on board with OPEC+ supply management. The increase may be tiny and the duration short, but it sets a terrible precedent, particularly after the public humiliation handed out to the UAE when it over-produced briefly in June.


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