LONDON, (Reuters) – Oil leapt 6 percent on Monday to more than $43 a barrel, as a rebound in global equity markets and further evidence of supply cuts by top exporter Saudi Arabia helped the market break a six-session losing streak.
Prices dropped 25 percent last week, their biggest weekly fall in nearly 18 years, depressed by the world economic outlook.
U.S. crude for January delivery was up $2.56 to $43.37 a barrel by 1003 GMT. It fell more than 6 percent on Friday to close at $40.81, its lowest since December 2004.
London Brent crude rose $2.56 to $42.30 a barrel. “Prices are higher on account of a short-covering bounce from extremely oversold conditions,” Edward Meir, of futures broker MF Global, said. “OPEC’s meeting is nine days away, meaning that we could see some strengthening leading into the meeting,” he said.
Oil has fallen more than $100 a barrel from a record peak above $147 in July, as the credit crisis has started to hurt the wider economy and shrink demand for fuel.
Members of the Organization of the Petroleum Exporting Countries have called for more supply cuts when the producer group meets on Dec. 17 in Algeria.
OPEC has already agreed to cut about 2 million barrels per day (bpd) of production.
The kingdom told at least two oil refiners in Asia on Monday it would deepen oil supply cuts to as much as 10 percent of normal contracted volumes in January versus a 5 percent cut in December supplies. It also reduced January supplies to some European refiners. But OPEC may need to make an additional cut of as much as 2 million bpd to bolster prices in a market where demand is falling. “The current downturn in prices has already priced in at least a 1.5 million bpd cut,” Tetsu Emori, a commodities fund manager at Japan’s Astmax Co. Ltd, said.
Monday’s rally spanned the commodities complex, with gold and copper rebounding strongly. European shares were firmer after strong gains in Asia.
Oil’s steep losses on Friday followed a U.S. employment report which showed the heaviest job losses in 34 years in the world’s top energy consumer. But global markets have taken heart from efforts by Washington to finalise a rescue for the struggling U.S. auto industry.
Oil could also find support from predictions of a cold winter in the United States, with December set to be the coldest since 2000 on average.