Oil surged as Saudi Arabia and Russia extended their pact to manage the market and Canada’s largest producing province ordered unprecedented output curbs.
After their worst month in a decade, prices in New York and London advanced more than 5 percent on Monday. Although Russia and Saudi Arabia have yet to confirm any fresh cuts, their leaders’ agreement over the weekend opens the door for a deal at OPEC’s meeting this week in Vienna. Canadian province Alberta’s decision to curtail production by 325,000 barrels a day drove oil’s rally, which largely ignored Qatar’s surprise announcement that it will leave the producer group to focus on natural gas.
“All in all the market was in desperate need of a psychological boost and that was provided this weekend, not only from Buenos Aires but also from Alberta,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Putin’s high-five with the Saudi crown prince could also have triggered another much-needed reduction in supply.”
Investors are taking heart from the bullish news after crude collapsed into a bear market last month. Fears that the Organization of Petroleum Exporting Countries and its partners will not curb output are easing. Trade tensions between the world’s two largest economies also appear to be thawing, allaying concerns about global oil demand.
President Donald Trump and his Chinese counterpart Xi Jinping called a truce in their trade dispute, with the U.S. president agreeing to postpone a planned tariff hike on Chinese goods for three months in return for greater purchases of American products. The pact prompted a rally in risk assets, including oil.
For more on the oil market Putin Says Russia, Saudi Arabia Will Extend OPEC+ Oil Pact Canada Joins Oil Cut Drive as Alberta Seeks to Ease Glut Crisis Brent Crude on Cusp of Flip Into Backwardation as Bulls Stomp Qatar to Leave OPEC as Politics Finally Rupture Oil Cartel OPEC Might Try to Kick Saudi Arabia When It’s Down: Julian LeeWest Texas Intermediate for January delivery climbed as much as 5.7 percent, the biggest intraday gain since June, to $53.85 a barrel on the New York Mercantile Exchange. The grade traded 4.2 percent higher at 11:22 a.m. in London. Total volume traded was more than double the 100-day average.
Brent for February settlement rose 3.9 percent to $61.75 a barrel on London’s ICE Futures Europe exchange, and was at an $8.54 premium to WTI for the same month. The January contract expired on Friday after declining 1.3 percent.
Meanwhile, Qatar’s energy minister said the country would leave OPEC from January, and would not be committed to any agreements by the group thereafter. Accounting for less than 2 percent of the cartel’s output, Qatar’s exit is most significant for any potential impact on the group’s cohesion.
Other oil-market news: Alberta will reduce production of raw crude and bitumen by 8.7 percentstarting in January until the levels of excess oil in storage are drawn down. The reduction would then drop to 95,000 barrels a day until the end of next year at the latest. OPEC+ technical teams are working on the level of cuts necessary and the reference baseline for the reduction, the United Arab Emirates Energy Minister Suhail Al Mazrouei said. Money managers cut total positions on WTI crude to the lowest level in five years, according to U.S. data released Friday.