Yemisi Izuora
Oil prices rose sharply on Tuesday, extending strong gains from the previous day ahead of expected Organization of Petroleum Exporting Countries, OPEC-led supply cuts and a mandated reduction in Canadian output.
The 90-day truce in the trade dispute between the United States and China was also still supporting markets, traders said.
US West Texas Intermediate (WTI) crude futures were at $53.35 per barrel up 40 cents, or 0.8 percent, from their last close, while the International Brent Crude oil futures were up 40 cents, or 0.7 percent, at $62.09 per barrel.
Both crude benchmarks climbed by around 4 per cent the previous session after Washington and Beijing agreed a truce in their trade disputes and said they would negotiate for 90 days before taking any further action.
The Middle East dominated Organization of the Petroleum Exporting Countries (OPEC) will on December 6 meet at its headquarters in Vienna, Austria, to agree a joint output policy. It will also discuss policy with non-OPEC production giant Russia.
“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 million barrels per day (bpd) will be required to reverse the ongoing counter-seasonally large increase in inventories,” the bank said.
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.
OPEC’s biggest problem is surging production in the United States, where output has grown by around 2 million bpd in a year to more than 11.5 million bpd .
China in November resumed imports of US crude oil, taking in one tanker at the end of last month, according to ship-tracking data, with another on order for delivery in January.
Britain’s Barclays bank pointed out that production in the state of Texas alone “reached 4.69 million bpd in September, compared with Iraqi output of 4.66 million by our estimates”. Iraq is OPEC’s second-biggest oil producer, behind only Saudi Arabia.