Oil prices rise on trade talk optimism, OPEC cuts

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Saudi-led OPEC and Russian Federation agreed on December 7 to curb their total crude oil production by 1.2 mbpd beginning on January 1 for six months, but the plan so far has had little impact on crude prices.

Brent crude futures (LCOc1) rose $1.39 a barrel, or 2.4 percent, to $58.72. Oil futures have gained more than 7 percent since last Monday.

West Texas Intermediate crude oil for February delivery CLG9, +0.06% rose $1.26, or 2.6%, to settle at $49.78 a barrel on the New York Mercantile Exchange—the highest finish for a front-month contract since December 17, according to Dow Jones Market Data.

"Momentum is coming back into the market from very depressed price levels", Petromatrix strategist Olivier Jakob said. Futures are rebounding as the Organization of Petroleum Exporting Countries and it allies start their pledged production cuts this month, led by Saudi Arabia, and after the US Federal Reserve signalled a hold in interest rate hikes that had spurred risk aversion and volatility across global financial markets.

The aim of the production cut is to rein in a surge in global supply, driven mostly by the United States, where production grew by almost a fifth to over 11 million bpd in 2018.

Because of record USA crude oil production C-OUT-T-EIA of 11.7 million bpd, American fuel stockpiles are rising, according to weekly data by the Energy Information Administration (EIA).

With drilling activity still high, most analysts expect USA oil production to rise further this year. The producers had made a decision to boost production in May to moderate rallying oil prices amid pressures from the United States to push them lower ahead of midterms.

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The API was also said to report that US crude inventories fell by 6.13 MMbbl last week. More upbeat equity markets also offered support.

"Surely, there will be more twists and turns in the saga and increasing USA tariffs on Chinese goods after March from 10 percent to 25 percent can not be excluded", Tamas Varga of PVM Oil Associates said.

Crude oil prices are up sharply Monday morning, extending gains to a sixth successive session, amid easing worries about global growth and energy demand after reports indicated a possible meeting of U.S. President Donald Trump and China's vice president Wang Qishan later this month.

Goldman Sachs said in a note on Monday that it had downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 due to "the strongest macro headwinds since 2015".

The row has added to concerns about an economic downturn, which would hurt demand for oil.

"Crude oil prices have benefited from OPEC production cuts and steadying equities markets", said Mithun Fernando, investment analyst at Australia's Rivkin Securities.

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