Oil climbs to three-month high on curbs, trade talks

LONDON/NEW YORK • Oil advanced to the highest level in almost three months as the world’s biggest economies prepare to continue negotiations this week after U.S. President Donald Trump was said to consider pushing back the deadline for tariff hikes.

Futures in New York on Monday rose to the highest intraday level since Nov. 20, after advancing 5.4 per cent last week. The U.S. and China sent signals after last week’s talks in Beijing that the two sides may be approaching a deal, raising hopes the nations’ trade war will ease.

Prices were also supported as Saudi Arabia pledges to cut its crude output beyond the level agreed with OPEC+ producers.

“OPEC+ supply cuts are in the driving seat of further recovery in oil prices with Saudi Arabia leading by example,” said Giovanni Staunovo at UBS Group AG in Zurich. The tightening market is also getting support from a steep decline in production by producers Libya, Iran and Venezuela.

Saudi Arabia and other members of the Organization of Petroleum Exporting Countries have made a strong start to their production cuts while Russia is accelerating its curbs, pushing crude about 23 per cent higher this year. Supply is also being threatened because of U.S. sanctions against Venezuela and Iran. Reports the U.S. and China had reached consensus in principle on the main topics in their trade negotiations helped boost investors’ risk appetite.

“Saudi Arabia seems willing to do whatever is necessary to reach levels of US$80 a barrel, and judging by the price reaction, they’re on track,” said Eugen Weinberg at Commerzbank AG in Frankfurt. “Even rather bearish factors, like a strongerthan-expected rise in U.S. oil production, does not seem to derail the price recovery.”

Rising U.S. oil exports are presenting a strong challenge to OPEC+ producers in Asia. India’s biggest refiner signed its first annual contract to buy two million tons of U.S. crude for the year starting April, according to a statement from Indian Oil Corp. on Monday.

A weakening performance of West Texas Intermediate against other global markers, Brent and Dubai, is making U.S. crude shipments more competitive.

WTI for March delivery rose 47 cents to US$56.06 a barrel before a 1 p.m. trading halt in New York. Transactions will be booked Tuesday for settlement because of the U.S. Presidents Day holiday. Prices last week posted their biggest gain in more than a month.

Brent for April settlement was at US$66.47 a barrel, up 22 cents, after gaining 6.7 per cent last week. The global benchmark’s premium over WTI for the same month narrowed to US$10.01.

Worries about the trade war worsening a global slowdown are receding, giving investors confidence that oil demand won’t be affected.