Domestic and international crude oil benchmarks rallied late in the session on Monday, reversing earlier losses on reports that Saudi Arabia will make voluntary cuts to its oil output in February and March. Natural gas futures extended yesterday’s gains after the latest forecasts projected weather-driven demand. Gold up but steady ahead of Georgia election results.
Oil Prices Jump 4% on OPEC+ Output Talks
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures climbed more than 4% on Tuesday as OPEC+ was nearing a compromise to hold crude production steady in February.
During talks with the Organization of the Petroleum Exporting Countries and others including Russia, Saudi Arabia offered to make voluntary cuts to its oil production in February, two OPEC+ sources said.
Saudi Arabia said it would unilaterally cut 1 million barrels a day of its current crude production next month, a surprise move that comes after it agreed earlier in the day with other big producers to keep their collective output flat.
Saudi Arabia and Russia reached a compromise on oil policy among the world’s biggest producers, agreeing to maintain output levels through February and delay any increase until March, according to officials familiar with negotiations.
The producer group was setting aside a possible output increase on fears that the market could be flooded with crude if new coronavirus lockdowns further depress demand, four OPEC+ sources told Reuters on Tuesday.
An OPEC document dated January 4 showed the group was studying a range of scenarios including more production, no change or cutting output by 500,000 barrels per day (bpd) in February.
The bullish news sent U.S. prices above $50 for the first time since February.
Natural Gas Futures Extend Gains on Fresh Demand Forecasts
February natural gas futures continued to build on Monday’s gains, while moving closer to its December 22 top at $2.775, a potential breakout point.
The American Global Forecast System (GFS) model added 12 heating degree days (HDD) overnight, while the European model picked up 3-4 HDD by trending slightly colder for the January 16-19 time frame, according to NatGasWeather.
Meanwhile, in the six- to 10-day period, covering Sunday through January 14, Maxar made colder adjustments to its latest forecast for the Midwest and South.
Gold Futures Reach Two-Month High
February gold futures popped to a two-month high early Tuesday, underpinned by growing concerns about COVID-19 and the possibility of new restrictions and lockdowns that could slow the global economic recovery. Some traders were also reacting to the weaker dollar and the possibility it could drop even further if the Democrats win special U.S. Senate run-offs in Georgia.