Oil prices rose on Tuesday in thin pre-Christmas trading after Russia said cooperation with OPEC on supply cuts would continue and amid optimism that the United States and China could finalize a trade agreement.
Brent crude settled up 81 cents, or 1.22 per cent, at $67.20 a barrel after a shortened session ahead of the Christmas holiday. U.S. West Texas Intermediate settled up 59 cents, or 0.97 per cent, at $61.11 a barrel.
OPEC and Russia will continue their cooperation as long as it is “effective and brings results,” Russian energy minister Alexander Novak said in an interview on Monday.
OPEC and allies agreed in November to extend and deepen output curbs in place since 2017. Under the reduced output, as much as 2.1 million barrels per day (bpd) could be taken off the market, or about 2 per cent of global demand.
Still, OPEC needs to do more to balance the market on a sustainable basis, Bjornar Tonhaugen, head of oil market research at Rystad Energy, said in a note.
“The OPEC cuts didn’t fully solve the problem – instead they offer a light bandage to get through the first quarter of 2020,” said Tonhaugen.
The market also rose as U.S. President Donald Trump said on Tuesday he and Chinese President Xi Jinping will have a signing ceremony to sign the first phase of the U.S.-China trade deal agreed to this month.. Trade tensions between the two countries have weighed on the oil market because of worries of a slowdown in demand growth.
Still, the market faces headwinds from growing supply.
A deal signed on Tuesday between Kuwait and Saudi Arabia on the Neutral Zone between the two countries could add to supply next year. The agreement aims to end a five-year dispute between the OPEC members and reopen fields which can produce 0.5 million bpd, or 0.5 per cent of global supply.
U.S. oil major Chevron Corp, which helps operate the fields, said full production was expected within 12 months.
While the Organization of the Petroleum Exporting Countries has been cutting production, U.S. producers have been filling the gap, pumping ever greater amounts of crude to reach a record high of about 13 million bpd in November.
That has helped swell inventories with U.S. stocks up about 1 per cent this year.
Crude stocks, however, are expected to have fallen by about 1.8 million barrels last week, a second week of declines, according to a preliminary Reuters poll.
The weekly government report on inventories has been delayed by two days due to Christmas. The report is normally released on Wednesday at 10:30 a.m. EST.