US-China trade deal hopes and OPEC cuts push oil prices higher

Oil prices neared their highest levels in three months on Tuesday, buoyed by rising hopes of a breakthrough in the US-China trade impasse along with news of an OPEC agreement for further supply cuts in the new year.

Brent crude gained more than 1% to settle at US$66.10 per barrel in yesterday’s trading, while US West Texas Intermediate (WTI) crude rose by 1.2% to close at $60.94 per barrel.

The higher trading of oil futures came after top White House advisor Larry Kudlow said on Monday that the Phase 1 agreement between the US and China has been ‘absolutely completed’, before predicting that US exports to China would double under the deal.

Meanwhile, oil prices were also boosted by OPEC members and its allies (known as OPEC+) decision to further oil supply cuts by 500,000 barrels per day (bpd) from January 1st to support the market. This is on top of the existing deal to trim supply by 1.2 million bpd, which came into effect earlier this year.

“Christmas has definitely arrived early for oil producers. The trend isn’t yet softening: Brent could get close to $70 before the rally starts to run on fumes,” said Oanda Europe senior market analyst Craig Erlam.