London — Oil prices rose more than 1% on Tuesday, extending gains ahead of expected output cuts by producer cartel Opec and a mandated reduction in Canadian supply.
North Sea Brent crude oil was up 75c, or 1.2%, at $62.44 a barrel by 8.45am GMT. US light crude was 65c higher at $53.60.
Both benchmarks climbed around 4% on Monday after US President Donald Trump and Chinese President Xi Jinping agreed at a meeting of the Group of 20 industrialised nations (G20) to pause an escalating trade dispute.
“The market seems positively oriented following the G20 developments and heading into the Opec meeting on Thursday,” BNP Paribas commodities strategist Harry Tchilinguirian told Reuters Global Oil Forum.
“A commitment by Russia to co-operate with Saudi Arabia and achieve an agreement at the next Opec meeting has certainly lifted spirits,” he added.
The Middle East-dominated Opec will meet on Thursday in Vienna to agree future output and will discuss strategy with other producers outside Opec, including Russia.
The group is widely expected to announce production cuts of more than one-million barrels a day, a move forced by rapidly rising shale output in the US and slower growth in global oil demand.
“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 a day will be required to reverse the ongoing counter-seasonally large increase in inventories.”
It added that it expected a joint effort by Opec and Russia to withhold supply to push Brent oil prices “above the mid-$60 a 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 barrels a day until excess crude in storage is reduced.
Opec’s biggest problem is surging production in the US where output, mostly from its southern shale fields, has grown by around one-million barrels a day in a year to more than 11.5-million barrels a day.
Barclays bank pointed out in a note to clients that oil production in the state of Texas alone “reached 4.69-million barrels a day in September, compared with Iraqi output of 4.66-million by our estimates”.
Iraq is Opec’s second-biggest oil producer, behind Saudi Arabia.