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Oil jumps 2 percent on expectations of production cuts

Reuters  |  LONDON 

By Christopher Johnson

LONDON (Reuters) - rose more than 2 percent on Tuesday, extending gains ahead of expected output cuts by producer cartel OPEC and a mandated reduction in Canadian supply.

Brent rose $1.55 or 2.5 percent to a high of $63.24 by 0955 GMT. U.S. light crude was $1.25 higher at $54.20.

Both benchmarks climbed around 4 percent on Monday after U.S. and Chinese 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 developments and heading into the OPEC meeting on Thursday," told Global Oil Forum.

"A commitment by to cooperate with and achieve an agreement at the next OPEC meeting has certainly lifted spirits," he added.

The Middle East-dominated Organization of the Petroleum Exporting Countries will meet on Thursday in to agree future output and will discuss strategy with other producers outside OPEC, including

OPEC and its allies are working towards a deal to reduce by at least 1.3 million barrels per day (bpd), OPEC sources have told Reuters, adding that they were still talking to about the extent of its production cuts.

"We expect OPEC to follow suit and agree to a production cut in this coming Thursday," U.S. said in a note to clients.

"A cut in OPEC and Russia production of 1.3 bpd 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 "above the mid-$60 per barrel level".

Helping OPEC in its efforts to rein in emerging oversupply was an order on Sunday by the Canadian province of for producers to scale back output by 325,000 bpd until excess crude in storage is reduced.

OPEC's biggest problem is surging production in the where output, mostly from its southern shale fields, has grown by around 2 million bpd in a year to more than 11.5 million bpd.

pointed out in a note to clients that in the state of alone "reached 4.69 million bpd in September, compared with Iraqi output of 4.66 million by our estimates".

is OPEC's second-biggest oil producer, behind

(Reporting by in London and Henning Gloystein in Singapore; Editing by and Kirsten Donovan)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, December 04 2018. 15:36 IST