Saudi Oil Shock Drives Oil Above $100, Fed Hike Odds Soar

Oil prices have surged above $100 per barrel after Saudi Arabia's crude oil production fell to its lowest level this year, according to OPEC data cited by the Financial Times. The country produced 6.2 million barrels per day in August, down 23% from July.

The decline has pushed Brent crude back above $100 a barrel and is feeding through into the US economy, with producer prices showing signs of higher energy costs. The Producer Price Index rose 5.4% year over year in August, up from 4.8% in July, with energy prices jumping 4.2% during the month.

Markets are now pricing a much more hawkish Federal Reserve, with the odds of a 25-basis-point rate hike at the September meeting climbing to about 71% after the PPI report, according to CME FedWatch.