Oil jumps after Saudi Arabia and Russia extend oil production cuts in ninth day of gains

<p>The oil market is going to be in a significant deficit through year end, pulling and global inventories and pushing up prices.</p><p>Saudi Arabia announced today that it would extend a voluntary 1 million barrels per day output cut through December and Russia quickly followed by saying it was cutting exports by 300k bpd through year end. Both added that caveat that the decision would be reviewed monthly but it's safe to say that it won't be 'reviewed' until oil prices hit at least $100 per barrel.</p><p>Brent jumped above $90 on the news from a low of $88.06 earlier. It's the ninth straight day of gains, with much of that coming last week after Russia's Novak hinted that a deal extension was coming.</p><p>Amena Bakr at Energy Intel said the cuts are no big surprise:</p><blockquote>This is very much inline with Energy Intel's expectations. The cuts will maintain healthy stock draws through the fourth quarter. That would allow inventories to draw by an average 900,000 b/d in the second half.</blockquote><p>We're at the seasonal peak of oil demand now and there is concern that Chinese demand is flagging. That said, Chinese air travel is running at around 15% above pre-covid levels, so there's still growth there. Some estimates for the current shortfall are at 2 million barrels per day. That will significantly draw down global inventories and leave OPEC in a strong position.</p><p>Perhaps the reason they've grown so emboldened is that US producers are showing discipline. US drilling rigs have fallen substantially from the start of the year and even in recent weeks haven't shown an uptick. That will keep US volumes from spiking.</p>

This article was written by Adam Button at www.forexlive.com.