Oil prices soared more than 6% on Friday after the United Arab Emirates joined Saudi Arabia in intensifying production cuts in line with OPEC’s announcement last week.
Light, sweet crude for February delivery jumped $2.36 to settle at $37.71 a barrel in electronic trading on the New York Mercantile Exchange as of 1:07 p.m. ET. On Wednesday, weak economic data helped push the contract down for the ninth straight day, with oil losing $3.63 to settle at $35.35. Trading was closed Thursday for the Christmas holiday.
The decision by the Organization of Petroleum Exporting Countries last week to slash daily output by a record 2.2 million barrels appears to be the first of a number of recent output cuts to halt oil’s downward spiral. The fact that two key OPEC members -- Saudi Arabia and the UAE -- seem to be abiding by the decision is important.
“It’s what they’re supposed to be doing, and signs are there that they’re going ahead with that,” said Tom Bentz, director and senior energy analyst at BNP Paribas Commodity Futures.
Another factor weighing on oil futures is the dense fog that prevented a number of ships from entering or exiting the Houston Ship Channel. As many as 40 ships have been affected by the fog, the U.S. Coast Guard told Reuters.
In other energy-related news, China National Offshore Oil Corp. and Taiwan’s CPC Corp. signed four oil cooperation agreements, according to the Xinhua News Agency.
The agreements included a modified contract on joint exploration and a transfer of a 30% stake of CNOOC's onshore Block 9 in Kenya to CPC, according to the report.
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