Brent Crude Rises as Saudi Arabia Says Will Cut Beyond Quota

By Grant Smith

Jan. 13 (Bloomberg) -- Brent crude oil rose for the first day in five and futures in New York recovered losses as Saudi Arabia said it will make deeper supply cuts beyond those announced at OPEC’s last meeting in December.

Saudi Arabia is currently producing 8 million barrels a day, roughly level with an 8.051 million barrel-a-day allocation agreed on Dec. 17, while February production will be “lower than the target,” Saudi Oil Minister Ali al-Naimi said as he arrived for a conference in New Delhi today.

“All announcements like this give some traders a reason to buy,” said Leo Drollas, deputy director of the Centre for Global Energy Studies, a London-based consulting company. “It will take time for the cuts to go through the tanks, but if they’re implemented we should see Brent rebound to average $74.50 in the fourth quarter.”

Brent crude oil for February settlement climbed as much as $1.08, or 2.5 percent, to $43.99 a barrel on London’s ICE Futures Europe exchange. It traded for $43.75 a barrel at 1:47 p.m. London time.

That left Brent $6.26 a barrel more expensive than futures traded in New York, where crude oil for February delivery was 10 cents higher at $37.49 a barrel on the New York Mercantile Exchange as of 1:47 p.m. London time. The contract recouped losses of as much as 4 percent after al-Naimi’s comments.

U.S. crude stockpiles probably gained 2.25 million barrels in the week ended Jan. 9, according to a Bloomberg survey before an Energy Department report tomorrow. The U.S. economy will contract 1.5 percent in 2009, a monthly poll of economists showed.

“The U.S. inventory build-ups have been massive,” said Eugen Weinberg, a Commerzbank AG analyst in Frankfurt. “Coupled with weak economic data, they are keeping near-month prices under strong pressure.”

Oman Minister

The U.S. economy will contract 1.5 percent this year, a half percentage point more than projected last month, according to the median of 59 forecasts in the survey taken from Jan. 5 to Jan. 12.

“I don’t see much movement in the oil price this year, prices won’t go much above $50 a barrel,” Mohammed al-Rumhy, Oil Minister of Oman, said in an interview in New Delhi today. “Of course, it depends on Obama’s success -- he wants to create 4 million jobs, so if we have 4 million new drivers tomorrow that we don’t have today, demand will rise and so will the price.”

The Organization of Petroleum Exporting Countries doesn’t need to cut output again “so far” and no emergency meeting is planned, Qatari Oil Minister Abdullah bin Hamad al-Attiyah said in Delhi today. OPEC members last week signaled compliance with a record 9 percent production cut announced Dec. 17.

Chinese Imports

Chinese crude imports rose 12 percent to 14.37 million metric tons from a year earlier, the Beijing-based Customs General Administration of China said on its Web site today. Full-year imports increased 9.6 percent to 178.9 million tons.

The U.S. Energy Department is scheduled to release its weekly report tomorrow at 10:30 a.m. in Washington.

U.S. crude-oil stockpiles probably increased 2.25 million barrels in the week ended Jan. 9 from 325.4 million the week before, according to the median of eight analyst estimates before the Energy Department report. That would be the 14th gain in 16 weeks.

This has pushed oil for February delivery to a 35 percent discount to the December future, a market situation known as contango where traders fetch higher prices for contracts for later delivery.

Gasoline stockpiles probably rose 1.5 million barrels from 211.4 million, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, probably climbed 1.5 million barrels from 137.8 million.

To contact the reporter on this story: Grant Smith in London at gsmith52@bloomberg.net.