Oil prices rose more than 2 percent on Tuesday, extending gains ahead of expected output cuts by producer cartel OPEC and a mandated reduction in Canadian supply. Brent crude oil rose $1.55 or 2.5 percent to a high of $63.24. U.S. light crude was $1.25 higher at $54.20. Both benchmarks climbed around 4 percent on Monday after U.S. President Donald Trump and Chinese President Xi Jinping agreed at a meeting of the Group of 20 industrialized nations (G20) to pause an escalating trade dispute.
The Middle East-dominated Organization of the Petroleum Exporting Countries will meet on Thursday in Vienna to agree future output and will discuss strategy with other producers outside OPEC, including Russia. OPEC and its allies are working towards a deal to reduce oil output by at least 1.3 million barrels per day (bpd), OPEC sources have told Reuters, adding that they were still talking to Russia about the extent of its production cuts. Helping OPEC in its efforts to rein in emerging oversupply was an order on Sunday by the Canadian province of Alberta for producers to scale back output by 325,000 bpd until excess crude in storage is reduced.
OPEC’s biggest problem is surging production in the United States where output, mostly from its southern shale fields, has grown by around 2 million bpd in a year to more than 11.5 million bpd. Barclays bank pointed out in a note to clients that oil production in the state of Texas alone “reached 4.69 million bpd in September, compared with Iraqi output of 4.66 million by our estimates”.