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Oil surges three percent on trade truce, expected supply cuts

Reuters  |  NEW YORK 

By Stephanie Kelly

NEW YORK (Reuters) - prices jumped by more than 3 percent on Monday after the and agreed to a 90-day truce in a trade dispute and Canada's province ordered a production cut, while group OPEC looked set to reduce supply.

Brent crude futures rose $1.86, or 3.1 percent, to $61.32 a barrel, by 11:07 a.m. EST (1607 GMT). U.S. Intermediate (WTI) crude rose $1.68 to $52.61 a barrel, a 3.3 percent gain.

Both benchmarks surged by more than 5 percent earlier in the session.

and the agreed during a weekend meeting in 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 and sparked concerns of an economic slowdown.

has not been included in the list of products facing import tariffs, but traders said the positive sentiment of the truce was supporting crude markets.

also received support from an announcement by that the Western Canadian province will 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.

The Organization of the Petroleum Exporting Countries meets on Thursday 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.

"While a reduction in output appears certain, the market will now be mainly focused on the size of any such reduction," Jim Ritterbusch, of Ritterbusch and Associates, said in a note. "We feel that a decline of about 1.1-1.2 million barrels per day will be required if fresh price lows are to be precluded."

Within OPEC, said it will leave the club in January. Qatar's is only around 600,000 bpd, but it is the world's biggest of liquefied (LNG).

Qatar's decision to quit OPEC shows the frustration of small producers at the dominant role of a Saudi and Russia-led panel, Iran's OPEC told Reuters, adding that any supply cuts should come only from countries that had increased output.

Outside OPEC, Russian stood at 11.37 million bpd in November, down from a post-Soviet record of 11.41 million bpd it reached in October, data showed on Sunday.

Russian said on Saturday he had no concrete figures on possible cuts, though his country would continue with its contribution to reducing global production.

Meanwhile, in the continue to churn out record amounts of oil, with crude output at about 11.5 million bpd.

(Reporting by in New York, Christopher Johnson in London and Henning Gloystein in Singapore; Editing by and Mark Potter)

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

First Published: Mon, December 03 2018. 22:52 IST