Oil prices climbed above $41 a barrel yesterday after Saudi Arabia cut January crude deliveries to clients in Asia, confirming that the top exporter was adhering to Opec's agreement last week to curb excess supply.
US light crude rose 30 cents to $41.01 a barrel, while London's Brent crude traded 42 cents higher to $37.80 a barrel.
Oil fell to a near five-month low on Friday on doubts over Opec's resolve to rein in one million barrels of daily output, and as Iraqi exports to the Turkish port of Ceyhan resumed after a 12-day stoppage due to sabotage.
Refiners in Japan, the world's third biggest oil consumer which imports virtually all of its needs, said yesterday they had been told by Saudi Arabia that supplies would be chopped by eight per cent in January versus December volumes.
South Korean refiners said they, too, faced an eight per cent cut in Saudi supplies.
"Saudi's eight per cent cut was a very quick move," said Tetsu Emori, chief strategist at Mitsui Bussan Futures in Tokyo. "It cannot be neglected as we are now in the peak winter season, however mild the weather has been this year."
Opec ministers agreed on Friday in Cairo to curb output. They said they would withdraw one million barrels a day (bpd) of production - around 3.5 per cent of current supply - from January 1.
Saudi Arabia is to take the biggest cut, at 500,000 bpd.
The Organisation of the Petroleum Exporting Countries had been pumping well above its 27 million bpd formal target this year to cool a price surge that saw US crude hit a record $55.67 a barrel in late October.
But prices have fallen sharply since then, tumbling about 25 per cent as oil stocks have risen, and Opec ministers feared a surplus of supply could bring the market down further, especially in the second quarter when demand usually falls after winter.
"Demand in the second quarter will drop one million bpd," Opec President Purnomo Yusgiantoro told reporters on the sidelines of an oil industry conference in Jakarta yesterday.
Opec will meet again on January 30 in Vienna to review market fundamentals and production policy.
"If prices will continue to fall from now to January we will have to cut the ceiling by 500,000 to one million bpd," Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah said on Saturday.
Consumer nations had urged Opec not to reduce supplies, saying oil stocks needed to rebuild to calm volatile prices and underpin economic growth.