Oil prices were on pace to post their best day in two weeks on Tuesday after Saudi Arabia said it would cut oil exports in November, while a big chunk of U.S. offshore production remained offline.
U.S. West Texas Intermediate crude surged $1.34, or 2.7 percent, to $50.92, marking the biggest one-day run-up since Sept. 25. It touched a session high of $51.06 on Tuesday.
Factoring in Monday’s 29-cents jump, WTI had wiped out much of last week’s 4.6 percent decline.
WTI intraday price, source: Factset
Traders were focused on news that Saudi Arabia will cut its November crude oil allocations to customers by 560,000 barrels a day, according to Andrew Lipow, president of Lipow Oil Associates.
The Saudis have sought to expedite OPEC’s effort to drain a global glut of crude oil by capping exports in addition to making voluntary production cuts. OPEC and other crude exporters led by Russia are keeping 1.8 million barrels a day off the market.
Some analysts were wary of the Saudi export cuts. Roberto Friedlander, head of energy trading at Seaport Global Securities, said requests for Saudi oil from Chinese refiners are lower due to scheduled refinery maintenance and government restrictions on imports.
“China and India are cutting their imports and more is coming from the U.S. export machine,” he said in a note on Monday. The Saudis “are spinning it as they are doing ‘more’ but it is just a fall in demand that is driving it.”
Lipow acknowledged the potential impact of maintenance season on demand for Saudi supplies, but said any drop in exports from OPEC’s biggest producer is bullish to the extent it takes oil off the market.
“We also happen to be seeing a significant amount of liquidation” of oil “that had been previously stored on tankers, as well as the liquidation of crude oil that has come out of onshore inventory in out-of-the-way places such as South Africa and the Caribbean,” Lipow said.
“At the same time, we’ve seen a number of strategic petroleum reserve releases that have added to supply that the market has easily absorbed,” he added.
WTI last month posted its best monthly gain since April 2016 after OPEC and the International Energy Agency said their outlook for crude oil demand had improved.
OPEC releases its next monthly report on Wednesday. The IEA follows suit on Thursday.
Also supporting prices, about 85 percent of U.S. oil output in the Gulf of Mexico was still shut down as of Monday, after Hurricane Nate blew through the U.S. offshore production hub. That was a slight improvement from Sunday, when more than 92 percent of production was offline.