Oil Rises on Saudi Arabia’s Supply Cut, Lower U.S. Stockpiles

March 10 (Bloomberg) -- Crude oil climbed for a third day in New York after Saudi Arabia told Asian refiners that it will reduce supplies next month and on speculation that OPEC output cuts led to a decline in U.S. inventories.

Saudi Aramco, the world’s biggest state oil company, will reduce shipments to Japan in April for a fifth month, said officials at three refineries who received notices. U.S. crude- oil supplies probably fell 500,000 barrels last week, according to the median of analysts estimates before an Energy Department report this week.

“The Saudis’ intention is to keep supplies cut and that has supported the market,” said Ken Hasegawa, a commodity derivatives sales manager at Newedge in Tokyo. “Right now the market is trying to confirm that we’ve come off the bottom after the sharp declines.”

Crude oil for April delivery rose as much as 37 cents, or 0.8 percent, to $47.44 a barrel in electronic trading on the New York Mercantile Exchange. It was at $47.30 a barrel at 9:56 a.m. Singapore time. Prices, up 6.1 percent this year, have tumbled 68 percent from a record in July.

Yesterday, futures rose $1.55, or 3.4 percent, to close at $47.07 a barrel, the highest settlement since Jan. 6.

The Organization of Petroleum Exporting Countries has cut production targets three times since September to combat price declines and prevent a glut on world markets. There is speculation the group will decide to reduce output when ministers gather in Vienna on March 15.

Oil will rise above $50 a barrel in the third quarter if OPEC cuts production by 1 million barrels a day at its March 15 meeting, Kuwaiti state news agency KUNA reported, citing Mussa Maarafi, a member of the country’s Supreme Petroleum Council.

OPEC Compliance

Saudi Arabia wants OPEC to comply with its existing output ceiling and opposes a further production cut, al-Hayat newspaper reported, citing an unidentified person.

The 11 OPEC members with quotas, all except Iraq, produced 25.39 million barrels a day in February, down from 29.22 million barrels a day in September, according to a Bloomberg News survey of oil companies, producers and analysts.

Brent crude oil for April settlement rose as much as 27 cents, or 0.6 percent, to $44.40 a barrel on London’s ICE Futures Europe exchange. It was at $44.36 a barrel at 9:24 a.m. Singapore time. The contract declined 72 cents, or 1.6 percent, to $44.13 a barrel yesterday.

Oil in New York traded at a premium of $2.94 a barrel to the Brent grade yesterday, the widest spread since Nov. 13.

The premium of Brent to West Texas Intermediate, the grade traded in New York, disappeared after a weekly Energy Department report on March 4 showed a third straight drop in stockpiles in Cushing, Oklahoma, the delivery point for New York futures. Rising inventories at Cushing had pushed WTI prices to record discounts to Brent crude.

The price of oil on the Nymex for delivery in May is more than 80 cents a barrel higher than for April, down from a 99 cent premium yesterday and a $2.20 premium on March 6.

This structure, in which the future month’s price is higher than the one before it, is known as contango and allows buyers to profit from hoarding oil.