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Oil prices jump on report Saudi plans to reduce drilling
[NEW YORK] Oil prices rose sharply on Tuesday, gaining a lift from speculation that Saudi Arabia is planning to cut back drilling as the market worries about excessive global supplies.
The market, already heading higher from the start of trade, "seems to have got an extra boost from a report out of Nabor Industries's earnings call," said Bob Yawger of Mizuho Securities.
Mr Yawger said the drilling company "claimed the Saudis have plans to reduce their rig counts by 10 per cent."
US benchmark West Texas Intermediate (WTI) for delivery in June rose US$1.40 (3.3 per cent) to US$44.04 a barrel on the New York Mercantile Exchange, its highest close since November.
Similarly, Brent North Sea crude for June delivery, the European benchmark, rose 2.8 per cent in London trade, finishing US$1.26 higher at US$45.74 a barrel.
Analysts said the rebound from Monday's losses was also possibly prompted by a slightly weaker dollar and poor US data on durable goods orders and consumer confidence.
"While short-term price movements may be driven by financial demand related to a weaker dollar, we continue to see a physical market that remains very well-supplied," cautioned Tim Evans of Citi Futures.
Meanwhile Bloomberg News reported that Saudi Arabia sold a spot cargo to a small independent Chinese refiner, Shandong Chambroad.
The 730,000-barrel shipment is unusual for Saudi Arabia, which generally makes sales under long-term contracts, and underscores its desire to expand market share in Asia.
"Saudi Arabia is reportedly making spot sales to a teapot refiner in China as a more aggressive competitive move than has been typical," Mr Evans noted.