9 Dec 2008

Oil jumps 7% as Saudi Arabia deepens cuts

10:59 am on 9 December 2008

The price of oil rose more than 7% on Monday as a rebound in global equity markets and prospects for deeper production cuts from OPEC helped the market break a six-session losing streak.

US crude for January delivery gained $US3.03 to $US43.84 a barrel by 1640 GMT, bouncing back from a 25% drop last week, its deepest weekly rout in 18 years.

London Brent crude rose $US2.95 to $US42.69 a barrel.

The rebound came alongside gains in other global commodity and equity markets as investors took heart from efforts by Washington to finalize a rescue for the struggling US car industry.

Oil also got a boost from signs of deepening supply cuts from top world supplier Saudi Arabia and prospects for a fresh OPEC agreement to further trim back output when the cartel meets 17 December.

Saudi Arabia, which has said it is seeking a $US75 price for a barrel of oil, told oil refiners in Asia it would deepen supply cuts to as much as 10% of contracted volumes in January versus a 5% cut in December.

It also reduced January supplies to some European refiners.

OPEC has already agreed to cut about 2 million barrels per day of production and members are leaning toward more supply cuts at the 17 December meeting in Algeria.

Monday's rally spanned the commodities complex, with gold and copper rebounding strongly.