Oil jumps 2% on hopes of cuts in production

london — Oil prices rose more than 2 per cent on Tuesday, extending gains ahead of expected output cuts by producer group Opec and a reduction in Canadian supply.

Benchmark Brent crude oil jumped by $1.89 to a high of $63.58 before easing back to trade around $63 by 1240 GMT. US light crude was up $1 at $53.95 after earlier gaining more than 3 per cent to an intraday high of $54.55.

Both benchmarks climbed by around 4 per cent on Monday after US President Donald Trump and Chinese counterpart Xi Jinping agreed at a meeting of the Group of 20 industrialised nations (G20) to pause an escalating trade dispute.

The Organisation of the Petroleum Exporting Countries meets on Thursday in Vienna to agree output policy and will discuss its strategy with producers outside Opec, including Russia.

Opec and its allies are working towards a deal to reduce output by at least 1.3 million barrels per day (bpd), Opec sources have told Reuters, adding that they were still talking to Russia about the extent of its production cuts.

However, Saudi Oil Minister Khalid Al Falih said it was too soon to be certain that Opec and other oil exporters would cut production because the terms of a deal remain unresolved.

Al Falih said he thought the market was oversupplied but he cautioned that all members of Opec and its allies needed to come together for a cut to go ahead.

“A cut in Opec and Russia production of 1.3 bpd will be required to reverse the ongoing counter-seasonally large increase in inventories,” Goldman Sachs said in a note.

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.