Oil prices climbed over 4 per cent on Monday after talks between the US and China resulted in a temporary truce to the trade war that has dragged down markets in recent months.  Anadarko photo.

Oil prices up over 5 per cent earlier in session

Oil prices jumped over 4 per cent on Monday on reports that the US and China have agreed to a 90-day truce in their trade war and Alberta’s premier Rachel Notley ordered a production cut at the same time the market is expecting OPEC to implement another supply cut in 2019.

By 3:02 p.m., EST, benchmark Brent crude futures rose $2.39 to $61.85/barrel and US WTI crude future were up $2.13 to $53.06/barrel.  Both Brent and WTI were up over 5 per cent earlier in the session.

The Canadian Crude Index rose by a whopping 32.33 per cent to $32.09.

While at the G20 in Buenos Aires over the weekend, China and the US agreed to not impose any additional trade tariffs for at least 90 days to allow the two sides to hold talks to resolve the trade disputes.

The trade war had weighed heavily on global trade and sparked concerns about an economic slowdown.  While crude oil was not included in the list of items facing import tariffs, the positive message coming from the talks helped buoy crude markets.

As well, the Alberta government announced on Sunday that it will force producers to cut their overall output by 8.7 per cent, or 325,000 barrels per day (b/d), to help ease the pipeline bottleneck which has resulted in a build up of crude inventories.

OPEC will meet later this week to determine if it will go ahead with another crude oil supply cut agreement aimed at tackling an oversupply that has significantly impacted oil prices since October.

“While a reduction in output appears certain, the market will now be mainly focused on the size of any such reduction,” Reuters reports Jim Ritterbusch, president 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.”

Also on Monday, Qatar announced it will leave OPEC next month.  The Middle Eastern country’s oil output is about 600,000 b/d, but it is the world’s largest exporter of liquified natural gas.

According to Iran’s OPEC governor Hossein Kazempour Ardebili, Qatar’s decision to leave the cartel highlights the frustration felt by smaller OPEC producers who are dealing with the dominant role played by Saudi Arabia and now Russia.

Ardebeili told Reuters that any supply cuts should come from countries that have increased their output.

At the G20, Russian President Vladimir Putin said his country would continue to contribute to plans cutting global crude production.  Russia’s production hit 11.37 million b/d in November, according to Energy Ministry data on Sunday.

Meanwhile in the United States, production hit a record high 11.5 million b/d.