Oil prices lifted this morning as markets responded to a potential breakthrough in US-China trade talks and production cuts by producer group Opec.
Brent crude rose 11 per cent to $66.23 a barrel in early trading, while West Texas Intermediate was up 0.25 per cent at $61.26.
“Oil prices continue to show year-end strength supported by a combination of definitive progress on the US-China trade deal, the December Opec agreement, and slowing shale activity,” said Stephen Innes, chief Asia market strategist at Axitrader.
“All of which is pointing to a stronger performance for oil prices in the first quarter than anyone had thought only two months ago.”
US President Donald Trump said on Tuesday said that he and Chinese President Xi Jinping will have a signing ceremony for the so-called phase one agreement set out earlier this month.
Once signed, the deal will be the first step in ending a 17-month spat between the world’s two largest economies that has rocked global markets and hit oil demand.
Lower demand has also sparked moves by Opec, which earlier this month agreed to extend production cuts to take as much as 2.1m barrels per day off the market, or roughly two per cent of global demand.
US producers, who are not part of the Opec agreement, have been producing record amounts of oil, especially shale crude, to fill any supply gaps. However, growth in US production is expected to slow.
Supply could also be given a boost after Saudi Arabia and Kuwait agreed earlier this week to end a dispute over their Neutral Zone, which can produce as much as 500,000 barrels per day of oil, or about 0.5 per cent of global demand.