Saudi Arabia surprised the oil market by promising significant additional production cuts beyond what was agreed with fellow OPEC members.
After two days of talks in Vienna that had focused on adjusting the group’s quota to formalize recent output levels and redistribute cuts more equitably among members, Energy Minister Prince Abdulaziz bin Salman sent prices soaring with the promise to take the kingdom’s production down to levels not seen on a sustained basis since 2014, according to data compiled by Bloomberg.
Oil jumped as much as 2.4% to $59.85 a barrel as of 10:09 a.m. in New York. Prince Abdulaziz also predicted that Saudi Aramco, which just completed an initial public offering at a valuation of $1.7 trillion, would soon soar above $2 trillion.
“We will continue the voluntary cut of 400,000” barrels a day, Prince Abdulaziz told reporters in Vienna on Friday. That brings total cuts implemented by the Organization of Petroleum Exporting Countries and its allies to 2.1 million barrels a day, he said.
The oil market faces a tricky patch early next year. Demand growth is slowing and another big expansion in rival production is coming down the pipeline. Together those factors could create another oversupply that drives international prices back down toward $50 a barrel.
That’s too low for most OPEC members to balance their budgets, and would make an unfortunate epilogue for the record-breaking initial public offering of Saudi Arabia’s state oil company, which set the final price of its shares on Thursday.