Oil prices jumped on Monday after the United States and China agreed a 90-day truce in a trade dispute, Canada’s Alberta province ordered a production cut, and as exporter group Organisation of Petroleum Exporting Countries (OPEC) looked set to reduce supply.
US light crude oil last traded $1.31, or 2.6 per cent, higher at $52.24. Brent crude was up $1.36, or 2.3 per cent at $60.82.
Both benchmarks surged by more than five per cent earlier in the session.
China and the US agreed during a weekend meeting in Argentina of the Group of 20 leading economies not to impose additional trade tariffs for at least 90 days while they hold talks to resolve existing dispute.
The trade war between the world’s two biggest economies has weighed heavily on global trade, sparking concerns of an economic slowdown.
Crude oil has not been included in the list of products facing import tariffs, but traders said the positive sentiment of the truce was also driving crude markets.
Oil also received support from an announcement by the Canadian province of Alberta that it would force producers to cut output by 8.7 per cent, or 325,000 barrels per day (bpd), to deal with a pipeline bottleneck that has led to crude building up in storage.
“From Argentina to Alberta, the oil market news is about supply curtailments. A brightening market mood will likely extend today’s price rally in the very near term,” said Norbert Rücker, head of commodity research at Swiss bank Julius Baer.
OPEC meets on December 6 to decide output policy. The group, along with non-OPEC member Russia, is expected to announce cuts aimed at reining in a production surplus that has pulled down crude prices by around a third since October.
“Markets are expecting to see a substantial production cut after Russian President Vladimir Putin said his country’s cooperation on oil supplies with Saudi Arabia would continue,” said Hussein Sayed, chief market strategist at brokerage FXTM.
Within OPEC, Qatar said yesterday it would leave the producer club in January.
Qatar’s oil production is only around 600,000 bpd, but it is the world’s biggest exporter of liquefied natural gas (LNG).
