LONDON: Oil prices jumped by more than 5 per cent on Monday after the United States and China agreed to a 90-day truce in a trade dispute, and ahead of a meeting this week of the producer club OPEC that is expected to cut supply.
US light crude oil rose $2.92 a barrel to a high of $53.85, up 5.7 per cent, before easing to around $53.00 by 0930 GMT. Brent crude rose 5.3 per cent or $3.14 to a high of $62.60 and was last trading around $61.60.
“From Argentina to Alberta, the oil market news is about supply curtailments,” said Norbert Rücker, head of commodity research at Swiss bank Julius Baer. “A brightening market mood will likely extend today’s price rally in the very near term.”
China and the United States 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 disputes.
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.
The Organization of the Petroleum Exporting Countries meets on Dec. 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.