Oil prices surge after US, China agree trade war ceasefire
Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Oil prices shot higher on Monday after the United States and China agreed to a 90-day truce in their trade conflict and ahead of a meeting by producer club OPEC this week that is expected to result in a supply cut.
U.S. West Texas Intermediate (WTI) crude futures were at $53.69 per barrel at 0249 GMT, up $2.76 per barrel, or 5.42 percent from their last close.
International Brent crude oil futures were up $2.85 per barrel, or 4.79 percent, at $62.31 a barrel. The global benchmark had earlier seen gains of 5 percent from the last close.
China and the United States agreed during the meeting of the Group of 20 (G-20) leading economies in Argentina over the weekend not to impose additional trade tariffs for at least 90 days while the pair 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 hundreds of products each side has slapped with import tariffs, but traders said the positive sentiment of the truce was also driving crude markets.
“The agreement to keep talking for 90 days during which tariffs are paused is an upside surprise,” U.S. bank Morgan Stanley said in a note to clients on Monday, although it added that trade negotiations would be “bumpy”.
Overall, however, Morgan Stanley it saw “slight upside in our 2019 growth outlook” because of the renewed talks.
Looking ahead, oil traders will eye a meeting by the Organization of the Petroleum Exporting Countries (OPEC) on Dec. 6. At the meeting, the producer group, as well as non-OPEC member Russia, is expected to announce supply cuts aimed at reining in a production overhang that has pulled down crude prices by around a third since October.
No official announcements regarding supply cuts have yet been made, but most analysts expect a reduction of 1-1.4 million barrels per day (bpd) versus October levels, which was the highest by OPEC as a group since December 2016.
“Expectations are for coordinated cuts to reduce an oversupplied market and to realign with slower growth in demand,” said Fitch Solutions in a note on Monday.
Meanwhile, oil producers in the United States 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 U.S. oil production to rise further in 2019.
— CNBC contributed to this report.