Saudis Cut Crude Production in December

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Prices for WTI crude have risen above $94 a barrel for the first time in nearly four months today, reaching a high point of $94.70 a barrel on the Nymex. Brent prices have also risen to highs today not seen since October.

Two bits of data are behind the rise. The first is the unexpectedly sharp 14.1% jump in Chinese exports during the month of December, raising the country’s trade surplus to $31.6 billion. The rise was accompanied by the importing of an additional 300,000 tons of crude in the month (about 2.2 million barrels).

The second bit of data comes from a source cited by Bloomberg, who said Saudi Arabian crude production fell by 5% in December to 9.025 million barrels a day. The cut in production is clearly an attempt by the Saudis to stabilize the price of crude at around $100 a barrel, their preferred price point.

Because most of the Saudi oil is contracted to specific customers, the production cut reflects lower demand from those customers and is also related to growing production in North America, where imports have also fallen. The official total OPEC quota calls for production of 30 million barrels a day, but actual production has been running higher for some months now as Iraqi production has increased.