Oil halts record losing streak as Saudis advocate supply cuts

NEW YORK (Bloomberg) -- Oil climbed the most in 2 1/2 weeks, halting an unprecedented decline, as Saudi Arabia pledged to curb output and urged allied crude producers to follow suit.

Futures in New York gained as much as 1.8% after entering bear-market territory last week. OPEC Secretary General Mohammad Barkindo on Monday warned that an international supply glut on par with the 2014 surplus that crushed oil markets is imminent. The 500,000-bpd production cut, promised by the Saudis, probably is only about half the curtailment required to forestall a glut, according to the kingdom.

“If we believe that Saudi Arabia will cut supply we’ll see what happens in December, but this will tighten up the market and should rally things up a bit,” said Bart Melek, head of global commodity strategy at TD Securities in Toronto. “I wouldn’t be too surprised to see crude head back closer to recent highs, maybe not to the October levels, but certainly off the recent lows.”

The Saudis are taking the lead to counter a price slide of about 20% since early October, which reflected U.S. waivers that tempered the impact of sanctions on Iran, as well as signs of an emerging glut in America.

West Texas Intermediate for December delivery advanced 73 cents to $60.92 per barrel at 10:43 a.m. on the New York Mercantile Exchange. Total volume traded was 72% above the 100-day average.

Brent futures for January settlement rose 76 cents to $70.94 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $9.98 premium to WTI for the same month.

Softer Demand

Saudi Energy Minister Khalid Al-Falih said Sunday that demand for the kingdom’s oil is “tapering off,” in part for seasonal reasons. As it cuts December shipments, the world’s biggest crude exporter may struggle to convince others to follow. Iraq has boosted production to a record and its more fragile economy may make it loathe to reverse course. Meanwhile, Russian Energy Minister Alexander Novak said he “would not want to focus purely on production cuts.”

A meeting between Novak, Al-Falih and other producers on Sunday yielded no formal change in supply policy, but did acknowledge they may need “new strategies.” Oil chiefs from Venezuela and Oman indicated they may side with the Saudis on the issue of output cuts.