Crude Heads For Another Weekly Gain On Saudi Arabia's Production Cuts

Crude oil traded on Friday near its highest in almost four months and is heading for its fifth weekly gain as Saudi Arabia cut oil production while hopes over the global recovery advanced, improving the outlook for demand on oil.

Saudi Arabia, the world’s largest crude exporter, reduced output in December by 4.9% to 9.025 million barrels a day, the lowest since November 2008, when the country and other OPEC members reduced supplies amid the global recession.

Crude's prices also found support Friday as the European Central Bank President Mario Draghi said on Thursday after the bank held rates unchanged that the euro-area economy will gradually recover this year, while Japan, the world's third largest economy, announced an $116 billion stimulus package.

“With Saudi Arabia holding back on supply, the market has decided to push oil up. If investors get behind the global recovery, then I think it can break through $95 a barrel,” said Jonathan Barratt from Barratt's Bulletin Sydney.

Moreover, crude found support last week from China's better than expected trade numbers, the short-term resolution of the US fiscal cliff and the tensions in the Middle East that threaten to disturb oil supplies from the region.

Crude oil traded as of this writing around the $93.90 a barrel, after rising about 0.07% or 7 cents, while Brent is trading around $111.55 after falling 0.32% or 36 cents. Natural gas was flat at 3.0445 while gasoline traded at $2.778 while heating oil traded at $3.0445.

However, last week's gains were smaller than the previous week as investors are cautious with the earnings season just kicking off, the U.S. crude stockpiles rose last week while the U.S. lawmakers continue to debate over the nation's debt ceiling.

Adding to the caution Friday was the rise in China's consumer inflation to a seven-month high in December, easing confidence in the growth prospects of the world's second largest oil consumer, and the rise in the U.S. jobless last week.