Oil prices soared overnight after a ceasefire in the US-China trade war was announced yesterday.
International standard Brent crude was up 4.7 per cent to $62.42 a barrel this morning UK time.
At the G20 meeting in Argentina over the weekend the US and China, the world’s two largest economies, agreed not to impose new trade tariffs for at least three months.
“The agreement to keep talking for 90 days during which tariffs are paused is an upside surprise,” analysts at Morgan Stanley said.
Prices have been driven down in recent weeks, hitting a one-year low last month over trade war concerns and production increases in both Russia and the US.
Economies which rely heavily on oil have been reacting to stabilise the markets.
This morning Alberta premier Rachel Notley said that Canada’s largest oil producing province would cut its output by 8.7 per cent, or 325,000 barrels per day (bpd), to drive up prices.
Limited pipeline space has caused production in the area to increase faster than it can be exported, driving a glut in storage. The resulting price decrease is estimated to have cost Canada billions of dollars.
Notley’s announcement came just days before oil producers’ cartel Opec is expected to replicate the decision on a much larger scale as they meet in Vienna on Thursday.
Key members such as Saudi Arabia have signalled they could support a cut in Opec production, to drive global prices back up.
“Markets are expecting to see a substantial production cut after Russian President Vladimir Putin said his country’s cooperation on oil supplies with Saudi Arabia would continue,” said Hussein Sayed at futures brokerage FXTM.
The news this morning that Qatar is planning to pull out of Opec is unlikely to have a major effect on the price of oil. The Qataris are the smallest of the group’s oil producers, extracting 600,000 bpd, but the largest natural gas producer in the world.
The gulf state will push ahead with plans to increase liquid natural gas production from 77m to 110m tonnes per year, energy minister Saad al-Kaabi said.
Qatar has been locked in a diplomatic dispute with Opec’s de facto leader Saudi Arabia for several months.
In June last year, the Saudis and other Middle Eastern countries started a boycott of Qatar, demanding, among other things, it close down the Al Jazeera news network.