Oil prices rose on Monday, buoyed by OPEC output cuts and reports that the United States and China are inching closer to a deal on a tariff row that has slowed global economic growth.
International Brent futures were up 80 cents at $65.87 a barrel by 1037 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 55 cents at $56.35 per barrel.
The United States and China appear close to a deal that would roll back U.S. tariffs on at least $200 billion worth of Chinese goods, as Beijing makes pledges on structural economic changes and eliminates retaliatory tariffs on U.S. goods, a source briefed on negotiations said on Sunday in Washington.
Hopes of an end to the trade spat between the two world’s biggest economies added support to a market that has been rallying for the past two months on cuts to production.
Supply from the Organisation of the Petroleum Exporting Countries (OPEC) fell to a four-year low in February, a Reuters survey found, as top exporter, Saudi Arabia and its allies over-delivered on the group’s supply pact while Venezuelan output registered a further involuntary decline.
In the United States, there are signs that the oil production boom of the past years, which has seen crude output rose by more than 2 million bpd since early 2018 to more than 12 million bpd, may slow down.
U.S. energy firms last week cut the number of oil rigs looking for new reserves to the lowest in almost nine months as some producers follow through on plans to cut spending despite an increase of more than 20 per cent in crude futures so far this year.
Hedge funds and other money managers raised their net long, or bullish, positions on Brent crude by 15,887 contracts to 291,336 in the week to Feb. 26.
“While much of the move higher in the market has come about due to short covering, in more recent weeks we have seen fresh longs starting to return to the market, suggesting that sentiment is turning more positive,” bank ING said.
But demand-side pressure may put a cap on further rises.
“Refineries are now clearly winding down for maintenance … That means softer crude off-take by refineries and softer signals from crude oil spot prices …” chief commodities analyst at SEB bank, Bjarne Schieldrop, said.