By Christopher Johnson
LONDON (Reuters) - Oil prices jumped by more than 5 percent on Monday after the United States and China agreed to a 90-day truce in a trade dispute, and ahead of a meeting this week of the producer club OPEC that is expected to agree to cut supply.
U.S. light crude oil rose $2.92 a barrel to a high of $53.85, up 5.7 percent, before easing slightly to around $53.50 by 0830 GMT. Brent crude rose 5.3 percent or $3.14 to a high of $62.60 and was last trading around $63.15.
China and the United States agreed during a weekend meeting in Argentina of the Group of 20 leading economies not to impose additional trade tariffs for at least 90 days while they hold talks to resolve existing disputes.
The trade war between the world's two biggest economies has weighed heavily on global trade, sparking concerns of an economic slowdown.
Crude oil has not been included in the list of hundreds of products that each side has slapped with import tariffs, but traders said the positive sentiment of the truce was also driving crude markets.
"The agreement to keep talking for 90 days during which tariffs are paused is an upside surprise," U.S. bank Morgan Stanley said in a note to clients on Monday. It added, though, that trade negotiations would be "bumpy".
Overall, Morgan Stanley said it saw a "slight upside in our 2019 growth outlook" because of the renewed talks.
Oil also received support from an announcement by the Canadian province of Alberta that it would force producers to cut output by 8.7 percent, or 325,000 barrels per day (bpd), to deal with a pipeline bottleneck that has led to crude building up in storage. Most of Alberta's oil is exported to the United States.
The Organization of the Petroleum Exporting Countries meets on Dec. 6 to decide output policy. The group, along with non-OPEC member Russia, is expected to announce cuts aimed at reining in a production surplus that has pulled down crude prices by around a third since October.
"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, chief market strategist at futures brokerage FXTM.
The Gulf state has also been at loggerheads with its much bigger neighbour Saudi Arabia, the de facto OPEC leader.
Meanwhile, oil producers in the United States continue to churn out record amounts of oil, with crude output at an unprecedented level of more than 11.5 million bpd.
With drilling activity still high, most analysts expect U.S. oil production to rise further in 2019.
(Reporting by Christopher Johnson in London and Henning Gloystein in Singapore; Editing by Kevin Liffey)
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)