London/Singapore: Oil prices jumped by more than 5% on Monday after the US 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%, before easing to around $53.00 by 1240GMT. Brent crude rose 5.3% or $3.14 to a high of $62.60 and was last trading around $61.75.
“From Argentina to Alberta, the oil market news is about supply curtailments," said Norbert Rucker, 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 US agreed during the G20 meeting in Argentina not to impose additional trade tariffs for at least 90 days while they hold talks to resolve existing disputes.
The US-China trade war 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%, 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 (Opec) meets on 6 December 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 on Monday 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). The Gulf state has also been at loggerheads with its much bigger neighbour Saudi Arabia, the de facto Opec leader.
Outside Opec, Russian oil output stood at 11.37 million bpd in November, down from a post-Soviet record of 11.41 million bpd it reached in October, energy ministry data showed on Sunday.
Meanwhile, oil producers in the US continue to churn out record amounts of oil, with crude output at an unprecedented level of more than 11.5 million bpd.
With drilling activity still high, most analysts expect US oil production to rise further in 2019.