Crude Oil Rises as Saudi Arabia Says It Will Make Deeper Cuts

By Mark Shenk

Jan. 13 (Bloomberg) -- Crude oil rose for the first time in six days in New York after Saudi Arabia said it will make deeper supply cuts than those announced at OPEC’s December meeting.

The country is producing 8 million barrels a day, about level with an 8.051 million barrel-a-day allocation agreed to 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.

“The announcement that the Saudis are willing to make additional cuts can’t help but be supportive,” said Gene McGillian, an analyst at Tradition Energy, an energy-management company in Stamford, Connecticut. “A lot of what were are seeing is the market finding some support after falling too much.”

Crude oil for February delivery rose 14 cents, or 0.4 percent, to $37.73 a barrel at 9:46 a.m. on the New York Mercantile Exchange. Futures touched $36.10, the lowest since Dec. 26. Oil is down 59 percent from a year ago.

“The Saudi comments are giving us a bit of support but I doubt they will be enough to keep the market in positive territory,” said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. “The economy is in terrible shape, which is putting pressure on almost all commodities.”

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 a survey taken from Jan. 5 to Jan. 12 by Bloomberg News.

U.S. Stockpiles

U.S. crude stockpiles probably gained 2.5 million barrels in the week ended Jan. 9, according to the median of 13 responses by analysts in a Bloomberg News survey. Inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, rose, the survey showed. The department will release its weekly petroleum supply report tomorrow.

“This month prices haven’t been able to break out of a $35- to-$50 range,” McGillian said. “We will have to wait and see if the expected inventory builds tomorrow coupled with further dismal economic news will cause us to break lower.”

Brent crude oil for February settlement rose $1.32, or 3.1 percent, to $44.23 a barrel on London’s ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.