Oil Rises With U.S. Supply Decline Compounding Saudi Output Cut

An oil pumping jack, also known as a "nodding donkey", in an oilfield near Neftekamsk, in the Republic of Bashkortostan, Russia, on Thursday, Nov. 19, 2020. The flaring coronavirus outbreak will be a key issue for OPEC+ when it meets at the end of the month to decide on whether to delay a planned easing of cuts early next year. Photographer: Andrey Rudakov/Bloomberg

(Bloomberg) -- Oil advanced as shrinking U.S. crude inventories added to expectations of a tighter global supply outlook after Saudi Arabia surprised markets by pledging to slice production the next two months.

Futures rose less than 1% in New York on Wednesday after a U.S. government report showed domestic crude stockpiles declined by the most since August last week and oil exports from Saudi Arabia plunged to zero for the first time in 35 years. However, the data also showed increases in both gasoline and distillate stockpiles.

Prices earlier rose as much as 1.3% to a 10-month intraday high, fueled by Saudi Arabia’s announcement on Tuesday to cut an extra 1 million barrels a day of oil production in February and March. While the kingdom’s decision prompted a sharp rally across various areas of the oil market, Goldman Sachs Group Inc. cautioned that the move reflects expectations for weaker oil demand.

West Texas Intermediate crude futures for February delivery rose 32 cents to $50.25 a barrel at 10:34 a.m. in New York. Brent for March settlement climbed 61 cents to $54.21 a barrel on the London-based ICE Futures Europe exchange.