Oil up on OPEC reduction rumors

Oil jumped more than a dollar to above $60 on Thursday after an OPEC delegate said the producer group will cut output by 1 million barrels per day as soon as possible to prop up prices.

Top world exporter Saudi Arabia will lower production by 300,000 barrels per day as part of the plan, the delegate said. Oil has slid from a peak of $78.40 in July, alarming OPEC, partly due to brimming inventories.

"Prices would have kept coming down unless we saw concrete action by OPEC," said Adam Sieminski, analyst at Deutsche Bank. "The build in inventories is telling you the market is pretty well supplied."

We still think that OPEC is bluffing – many of the cartel members have upped spending and need to maintain high prices, but long term we expect oil to creep back to $50 per barrel as the mild winter and reserves allay fears in the USA.