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Oil surges on trade truce and expected supply cuts

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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 agree 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 slightly to around $53.50 by 0830 GMT. Brent crude rose 5.3 per cent or $3.14 to a high of $62.60 and was last trading around $63.15.


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 hundreds of products that 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,” US bank Morgan Stanley said in a note on Monday. It added, though, that trade negotiations would be “bumpy”.


Overall, Morgan Stanley said it saw a “slight upside in our 2019 growth outlook” because of the renewed talks.


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 Opec, together with Russia meets on December 6 to decide output policy. The group is expected to announce cuts aimed at reining in a production surplus that has pulled down crude prices by around a third since October. — Reuters


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