LONDON: Oil prices jumped by more than 3% on Monday after the United States and China agreed to a 90-day truce in their trade dispute and Canada’s Alberta province ordered a production cut, while exporter group OPEC looked set to reduce supply.
Brent crude futures rose $1.86, or 3.1%, to $61.32 a barrel by 11:07 am EST (1607 GMT). US West Texas Intermediate (WTI) crude rose $1.68 to $52.61 a barrel, a 3.3% gain. Both benchmarks surged by more than 5% 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 disputes. The trade war between the world’s two biggest economies has weighed heavily on global trade and sparked 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 supporting crude markets.
Oil also received support from an announcement by Alberta that the western Canadian province will 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 Organisation of Petroleum Exporting Countries (OPEC) will meet on Thursday 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. “While a reduction in output appears certain, the market will now be mainly focused on the size of any such reduction,” Jim Ritterbusch, President of Ritterbusch and Associates, said in a note.
Published in The Express Tribune, December 4th, 2018.