Oil prices jumped 8% this evening on signs that key producer Saudi Arabia has slashed supplies to customers for January as the economic crisis continues to slow demand.
Saudi Arabia told major customers it was reducing supplies substantially next month in a move that could bring the kingdom's output below its implied OPEC target of 8.47 million barrels per day.
US crude jumped $3.22 to $45.29 a barrel while London Brent crude was up $2.72 to $44.25.
OPEC next meets on December 17, and the group is widely expected to agree to more output cuts. Slumping demand in the US and other developed economies has knocked crude down sharply from record highs over $147 struck in July.
A US Energy Information Administration report this week forecasting the first contraction in world oil demand since 1983 added to expectations that OPEC will deepen cuts.
Earlier, crude came under pressure as US data showed rising fuel stockpiles in the world's top consumer as demand slumps. Distillate stocks rose by 5.6 million barrels in the week to December 5, according to Energy Information Administration, while petrol stocks gained 3.8 million barrels. Crude inventories rose slightly. Total US demand fell 6% over the past four weeks compared with a year earlier.
Crude imports by number two oil consumer China hit the lowest level in a year in November. Meanwhile, Russia's energy minister said his country's output was likely to decline in 2008 despite government attempts to stimulate production. Russia is not an OPEC member.
