Oil prices rose Tuesday in thin pre-Christmas trading after Russia said cooperation with Opec on supply cuts would continue and amid optimism the U.S. and China will finalize a trade agreement.
Brent crude was up 81 cents, or 1.22%, at $67.20 a barrel, while U.S. West Texas Intermediate crude gained 59 cents, or 1%, to settle at $61.11/Bbl, Kallanish Energy reports.
Opec and Russia will continue their cooperation as long as it is “effective and brings results,” Russian energy minister Alexander Novak said in an interview on Monday, Reuters reported.
Opec+, which includes most Opec members plus 10 non-Opec producers led by Russia, agreed in November to extend and deepen output curbs in place since 2017. Under the reduced output, as much as 2.1 million barrels per day (Mmbpd) could be taken off the market, or about 2% of global demand.
Still, Opec needs to do more to balance the market on a sustainable basis, Bjornar Tonhaugen, head of Oil Market Research at Rystad Energy, said, in a note. “The Opec cuts didn’t fully solve the problem instead they offer a light bandage to get through the first quarter of 2020,” Tonhaugen wrote.
The market also rose as President Trump said Tuesday he and Chinese President Xi Jinping will have a signing ceremony to sign the first phase of the U.S.-China trade deal agreed to this month.
Trade tensions between the two countries have weighed on the oil market because of worries of a slowdown in demand growth.
Still, the market faces headwinds from growing supply. A deal signed Tuesday between Kuwait and Saudi Arabia on the Neutral Zone between the two countries could add to supply next year.
The agreement aims to end a five-year dispute between the Opec members and reopen fields which can produce 0.5 Mmbpd, or 0.5% of global supply. U.S. oil major Chevron Corp, which helps operate the fields, said full production was expected within 12 months.
While Opec members have been cutting production, U.S. producers have been filling the gap, pumping ever greater amounts of crude to reach a record high of roughly 13 Mmbpd in November.
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