Oil prices rebound as Saudi Arabia pledges to cut production by 500,000 barrels per day

Saudi Arabia has pledged to cut oil production in December, sending oil prices surging this morning.

Energy minister Khalid al-Falih said the kingdom would reduce oil supply to global markets by 500,000 barrels per day in December compared with November.

Brent crude oil rose more than two per cent to $71.69 per barrel, having sunk below the $70 mark last week.

WTI Crude also climbed further above its recent nine-month low of $60 per barrel, trading at $61.24 this morning.

Other members of oil cartel Opec, of which Saudi Arabia is the de facto leader are also believed to be considering reductions in oil supply.

An official from Kuwait said oil producers met over the weekend and “discussed a proposal for some kind of cut in supply next year”, while Iraq has also suggest it would support a cut.

Oil prices had fallen by 20 per cent over the past two weeks after US sanctions imposed on Iran had a less severe impact on oil supply than expected.

Donald Trump granted waivers to eight importers of Iranian oil, including Japan and South Korea.

Craig Erlam, analyst at OANDA, said the decision to cut supply next year “doesn't come as much of a surprise” given high inventory data and Iran sanction waivers.

He said: “It also doesn't bind the countries to committing to such a move and there is likely to be some debate on the need for such a move, with Russia expressing doubt.”

Prices had initially surged ahead of the sanctions being enforced and major oil exporters boosted production in a bid to temper the rise.

“In the short term this is a positive for oil, but we must question the impact longer term unless it's the sign of more to come from Opec,” Neil Wilson from Markets.com said.

“Saudi Arabia cannot act alone though – realistically it needs to pull together Opec allies and, critically, Russia to curb production if it wants prices to hold,” he added.