Oil in New York posted the biggest weekly gain since June after Saudi Arabia surprised the market with a significant supply cut beyond what was agreed to with fellow OPEC+ members.

WTI settled 1.3 per cent higher on Friday after Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said the country would continue its voluntary cut of 400,000 barrels a day. That brings total cuts implemented by the Organization of Petroleum Exporting Countries and its allies to 2.1 million barrels a day, he said.

“The comments are what drove the market up,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass. “Total cuts are larger and substantially better than what the market was expecting.”

After the announcement, Prince Abdulaziz predicted that Saudi Aramco, which just completed an IPO at a valuation of US$1.7 trillion, would soon soar above US$2 trillion. The kingdom plans to pump 9.7 million barrels a day, he said. The additional supply reduction would take the kingdom’s production down to levels not seen on a sustained basis since 2014, according to data compiled by Bloomberg.

Still, prices surrendered some of their early gains after the initial surge. “Investors have other concerns limiting the upside including what will come of trade over the weekend,” said Rob Haworth, who helps oversee US$151 billion at U.S. Bank Wealth Management in Seattle.

While OPEC+ is taking 500,000 barrels a day out of the market, they are taking it out because demand isn’t there, he added. “They were crowded out by non-OPEC output, like U.S. output. So, it should be a more bearish scenario for prices.”

West Texas Intermediate for January delivery settled up 77 cents to $59.20 a barrel on the New York Mercantile Exchange. The U.S. benchmark rose 7.3 per cent for the week.

Brent for February settlement gained US$1 to US$64.39 a barrel on the London-based ICE Futures Europe Exchange, registering the largest weekly gain since late October. The global benchmark traded at a US$5.29 premium to WTI for the same month.

Other oil-market news

  • Gasoline futures settled up 1.62 per cent at US$1.6474 a gallon
  • Saudi Aramco raised US$25.6 billion from the world’s biggest initial public offering, closing a deal that became synonymous with the kingdom’s crown prince and his plans to reshape the nation.
  • At a time when U.S. refiners are ramping up to produce as much fuel as possible, refineries operated by embattled Petroleos de Venezuela SA are processing just one out of every 10 possible barrels.
  • The exclusion of a light oil called condensate from Russia’s output target under the OPEC+ deal is not a loophole, but a way to bring the country in line with the rest of group, said Energy Minister Alexander Novak.
  • China will announce the creation of its long-planned national oil and gas pipeline company on Dec. 9, according to people familiar with the matter.