Crude oil futures have spiked in early trade on Monday, finding support on reports that Saudi Arabia will cut production levels in December.
- Both WTI and Brent futures are up 0.75%, having jumped more than 1% in initial trade.
- RBC Capital Markets says the likelihood of an official production cut at OPEC’s December 6 meeting has increased. However, it warns this could see some push-back from US president Donald Trump.
Crude oil futures have spiked in early trade on Monday, following reports that Saudi Arabia will cut production levels in December.
The move is likely designed to stop the slide in crude prices which had recently fallen over 20% from early October, leaving them in a technical bear market.
“Saudi Arabia has stepped in front of the Oil market bears proactively announcing they will reduce exports by 500,000 barrels per day in December,” says Stephen Innes Head of Trading Asia-Pacific at OANDA.
“Oil prices above $80 are never welcome by OPEC customers, and that seems to be a similar consensus among OPEC, non-OPEC and US producers.
“However, producers are concerned that the latest selling frenzy could see Brent oil reach $60 or below. So, it’s in OPEC’s best interest to tame the current supply glut.”
After jumping over 1% in early trade, front-month Brent and WTI Crude futures are currently trading at $70.70 and $60.63 a barrel, up 0.75% from Friday’s closing level.
Looking ahead, Commodity Analysts at RBC Capital Markets believe the likelihood of an official production cut from OPEC and its key allies at its December meeting is now increasing.
“The odds of a cut next month seem fairly high and that it will likely be in the 1 million barrels per day range,” it says.
However, it says that key uncertainties remain, including how US President Donald Trump may react to attempts to boost prices.
“His twitter comments and back channel pressure played a pivotal role in prompting Saudi Arabia and its key OPEC allies to open the taps,” it says.
“Now that OPEC is showing clear signs of second thoughts, will he once again take to social media to forestall such a change or with the midterms in the rear view mirror, will he turn his attention elsewhere?”
We’ll likely find that answer out shortly, especially should crude prices continue to rally ahead of the December 6 meeting.