Oil up on hopes of output cuts

LONDON: Oil prices rose more than 1 per cent on Tuesday, extending gains ahead of expected output cuts by producer cartel OPEC and a mandated reduction in Canadian supply. North Sea Brent crude oil was up 75 cents, or 1.2 per cent, at $62.44 per barrel by 08:45 GMT. US light crude was 65 cents higher at $53.60.
Both benchmarks climbed around 4 per cent on Monday after US President Donald Trump and Chinese President Xi Jinping agreed at a meeting of the Group of 20 industrialised nations (G20) to pause an escalating trade dispute.
“The market seems positively oriented following the G20 developments and heading into the Opec meeting on Thursday,” BNP Paribas commodities strategist Harry Tchilinguirian told Global Oil Forum.
“A commitment by Russia to cooperate with Saudi Arabia and achieve an agreement at the next Opec meeting has certainly lifted spirits,” he added.
The Middle East-dominated Organization of the Petroleum Exporting Countries will meet on Thursday in Vienna to agree future output and will discuss strategy with other producers outside Opec, including Russia.
The group is widely expected to announce production cuts of more than 1 million barrels per day (bpd), a move forced by rapidly rising shale output in the United States and slower growth in global oil demand.
“We expect Opec to follow suit and agree to a production cut in Vienna this coming Thursday,” US bank Goldman Sachs said in a note to clients.
“A cut in Opec and Russia production of 1.3 bpd will be required to reverse the ongoing counter-seasonally large increase in inventories.”
It added that it expected a joint effort by Opec and Russia to withhold supply to push Brent oil prices “above the mid-$60 per barrel level”.
Helping Opec in its efforts to rein in emerging oversupply was an order on Sunday by the Canadian province of Alberta for producers to scale back output by 325,000 bpd until excess crude in storage is reduced. — Reuters