Oil prices rose on Tuesday on OPEC data showing a sharp reduction in output last month.  On Monday, Saudi Arabia announced it will cut its production in March by an additional 500,000 barrels.  Repsol photo.

Oil prices up almost 2 per cent

Oil prices rose almost 2 per cent on Tuesday after data from OPEC showed the cartel sharply cut its production in January.  As well, Saudi Arabia announced it will cut its output by an additional 500,000 barrels in March.

Investor optimism for a breakthrough in the latest round of talks between officials from the US and China also helped boost oil prices.

By 5:19 p.m., EST, benchmark Brent crude futures were up $1.09 to $62.60/barrel and US West Texas Intermediate futures rose 93 cents to $53.34/barrel.

OPEC production cuts have helped tighten crude markets, despite rising production from non-cartel countries, including the United States.  According to the US Energy Information Administration, US production is expected to hit a new record of 13.2 million barrels per day (b/d) through 2020.

According to OPEC, the group reduced its oil output by almost 800,000 b/d in January to 30.81 million b/d.

Along with cutting supply, the cartel has also cut its forecast for world oil demand this year, citing slowing economies and boosted its expectations of supply growth from its rivals.

Saudi Arabia’s Energy Minister Khalid al-Falih told the Financial Times that the kingdom will reduce its output to 9.8 million b/d next month to help increase oil prices.  Under the latest OPEC supply cut agreement, the Saudi’s have pledged to cut their production to 10.3 million b/d.

“The market was bid on the OPEC report, the OPEC numbers themselves, and Saudi Arabia bringing the production numbers down pretty good,” Bob Yawger, director of energy futures at Mizuho told Reuters.

A fresh round of trade talks between the United States and China has also boosted the market’s mood.  Yawger said investors are hopeful that the two sides are close to resolving the ongoing trade war.  Negotiators are facing a March 1 deadline to complete the deal or US tariffs on some Chinese goods will increase from 10 per cent to 25 per cent.

US President Donald Trump said he could extend the deadline to hike tariffs if the two sides get close enough to an agreement.