Oil prices shoot higher after non-OPEC deal, Saudi says will cut more

(ShareCast News) - Oil prices shot higher after non-OPEC producers agreed to reduce their own output in parallel to the cut announced by the oil cartel on 30 November.Adding to the buying pressure in crude oil futures, shortly after the announcement OPEC linchpin Saudi Arabia said it would lower its production by more than it committed to at OPEC´s last meeting.Starting in 2017, Russia and ten other non-OPEC producers agreed to reduce production by 558,000 barrels per day, slightly less than the 600,000 barrel a day contribution they had been asked for.Nonetheless, it marked the first time since 2001 that they had cut alongside OPEC.Significantly, Saudi oil minister Khalid al-Falih said: "I can tell you with absolute certainty that effective Jan. 1 we're going to cut and cut substantially to be below the level that we have committed to on 30 November."At the cartel´s last meeting, Saudi had pledged to reduce production from 10.7m b/d to 10.06m b/d.That, in effect, meant Saudi was eliminating one of its previous 'red lines', Morgan Stanley said."Still, this is not necessarily a pledge that Saudi Arabia will cut below 10 mb/d but instead an indication that it may do so under specific circumstances, for example if Libya and Nigeria see stronger-than-expected production growth. Saudi Arabia's intention to adhere to its OPEC quote was further supported on Friday by a Reuters report saying that the country has indeed told its U.S.and European customers by now that it will reduce oil deliveries from January," the broker went on to explain in a research report sent to clients. The Russian Federation said it would slash production by 300,000 b/d, Mexico by 100,000 b/d, Azerbaijan by 35,000 b/d, Oman by 40,000 and Kazhakstan by another 20,000."In case of full compliance, market could be balanced as early as 1Q17, with stocks drawing thereafter," Morgan Stanley said.In the same note, the broker reiterated its 'overweight' stance on shares of: Shell, BP, Tullow, Technip, Vallourec and Subsea 7. As of 0839 GMT, front month Brent crude futures were higher by 5.0% to $57.19 per barrel and West Texas Intermediate by 5.33% to $54.40.