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Oil surges on Saudi output cut

Thursday, January 10 15:56:34

Brent crude oil rose more than $1 to a 12-week high today after news of a sharp cut in Saudi oil production, an explosion in Yemen that halted most of the country's oil exports and bullish Chinese trade data.

Saudi Arabia cut its crude oil production by about 700,000 barrels per day (bpd) over the last two months of last year, with December output at around 9 million bpd, an industry source familiar with Saudi oil policy said.

The world's largest oil exporter produced 9.025 million bpd in December, down from 9.49 million bpd in November and more than 1 million bpd below its peak production last summer.

Flows of oil through Yemen's main crude export pipeline stopped on Thursday after it was blown up by unknown attackers, government and oil industry officials said.

On the demand side, strong Chinese trade data raised expectations that an economic recovery in the world's second-biggest oil consumer would drive fuel consumption higher.

Brent crude oil for February rose $1.53 to a high of $113.29, its highest since Oct. 18, before easing back to $112.85 by 1425 GMT. U.S. light crude oil futures rose $1.60 to peak at $94.70 a barrel.

"These three factors - Saudi Arabia, Yemen and the China data - are all helping to push up the market," said Tamas Varga, an oil analyst at broker PVM Oil Associates in London.

Riyadh says it favours an oil price of about $100 a barrel, but recent reports have suggested that the market is well supplied and that output from some areas, particularly North America, will grow rapidly over the next two years.

"Short term, the Saudi output figures are bullish, but longer term they are more bearish, because they suggest Saudi Arabia sees the need to cut to balance the market," Varga said. (C ) Reuters