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Oil rises 1% on US-China trade optimism, Opec+ supply cuts
[LONDON] Oil prices rose about 1 per cent on Monday as the United States and China appeared closer to ending a trade war that has slowed global economic growth while Opec ally Russia said it would ramp up its crude supply cuts.
Gains were tempered by a drop in equity indexes, which weakened sentiment on oil markets.
Brent crude futures settled at US$65.67 a barrel, up 60 cents or 0.9 per cent. US West Texas Intermediate (WTI) crude futures ended 79 cents, or 1.4 per cent, higher at US$56.59 a barrel.
Washington and Beijing were close to reaching a trade deal that would roll back US tariffs on at least US$200 billion worth of Chinese goods as China pledges to make structural economic changes and end retaliatory tariffs, a source briefed on negotiations said on Sunday.
"The bottom line is the optimism surrounding the trade situation," said Bob Yawger, director of energy futures at Mizuho. "Comments from oil minister Novak that he was going to get to his level by the end of March also bid the market," Mr Yawger said.
Russia, the biggest non-member ally of the Organization of the Petroleum Exporting Countries, plans to speed up crude output cuts this month, Energy Minister Alexander Novak said.
Opec and its partners, known as Opec+, will likely decide on a new output policy in June instead of during the group's April meeting in Vienna, OPEC sources told Reuters.
Opec+ is expected to extend supply cuts at its June meeting, but much depends on the extent of U.S. sanctions on Opec members Iran and Venezuela, the sources said.
Crude supply from Opec hit a four-year low in February, a Reuters survey found, as top exporter Saudi Arabia reduced production more than it had agreed to, and as US sanctions on Venezuelan oil took effect.
"It still looks like Opec and Saudi Arabia are showing their ability to restrict supply," said Thomas Saal, senior vice president of INTL Hencorp Futures in Miami. "I think as long as that narrative is still in the market, it's going to keep the market strong."
The cuts have helped crude prices rally more than 20 per cent so far this year despite surging US production.
US crude oil stockpiles were seen rising last week, while refined products likely fell for a third consecutive week, a preliminary Reuters poll showed on Monday.
Libyan state oil company (NOC) said production would resume at its 315,000 barrels per day El Sharara oilfield to regular output over the coming days.
The opening of the field, which was closed in December when state guards and tribesmen seized it, will add to global crude supply.