Russia, Saudi’s to Cut Output; Crude Oil Rises
Oil gained more than 3 percent on Wednesday as signs emerged that Saudi Arabia has cut supplies to its customers for January, and word that Russia is now preparing an output reduction in step with OPEC.
The Saudi’s have made it known to some of their major customers that they are planning on substantially reducing supplies next month to the point that they would be below their OPEC quota of 8.47 million barrels per day.
London Brent crude settled up 87 cents at $42.40 a barrel.
Russian Energy Minister Sergei Shmatko said that by Dec. 17, OPEC’s scheduled meeting date in Algeria, the Russian’s would announce a plan to reduce oil production. He didn’t go into details of how much would be cut, but he did say that the Russians were lobbying other non-OPEC nations to do likewise.
OPEC is expected to make a major production cut at their next scheduled meeting. Rising crude stocks as demand continues to drop due to the economic crisis in the U.S. and abroad have caused the price for a barrel of crude to drop over $100 from its high in July of this year.
Demand fell 6.1 percent over the past four weeks against year-ago levels, according to a report by the Energy Information Administration. U.S. gasoline demand is expected to decline more sharply this year and next than in any other two-year period since 1979-1980, the report said.
Even China has been cutting back on imports, hitting their lows for the year in November as refiners begin to scale back in their buying due to weakening demand.