Oil held near a three-month high as production cuts by Saudi Arabia tempered concerns a trade war between the world’s two biggest economies will continue to weigh on the global growth outlook.
Futures were steady in New York, after gaining around 7 percent since Feb. 11. The Saudis went beyond pledged output reductions in January, but only 10 of 21 nations in the OPEC+ coalition fully complied with the agreed cuts that are aimed at shrinking a global glut, according to Bloomberg estimates. U.S.-China negotiations resumed Tuesday ahead of a March 1 deadline for higher American tariffs on the Asian country’s goods.
Facing a surge in U.S. shale flows, the Organization of Petroleum Exporting Countries and its allies started a fresh round of supply curbs last month that have helped push oil around 24 percent higher this year. While Russia was among the countries that were behind on committed cuts, Moscow’s willingness to continue cooperating with Riyadh in stabilizing the market has aided gains.
“Oil’s rally has mainly been driven by OPEC+ production curbs, especially with Saudi Arabia’s determination to push prices higher,” said Ahn Yea Ha, a commodities analyst at Kiwoom Securities Co. in Seoul. There’s growing optimism the U.S. and China can resolve their trade conflict, she said.
West Texas Intermediate for March delivery, which expires Wednesday, added 7 cents to $56.16 a barrel on the New York Mercantile Exchange at 7:48 a.m. in London. It gained 0.9 percent on Tuesday to close at the highest level since Nov. 19. The more-active April contract rose 13 cents to $56.58.
Brent for April settlement dropped 1 cent to $66.44 a barrel on the London-based ICE Futures Europe exchange. The contract lost 5 cents to settle at $66.45 on Tuesday, snapping a five-day rally. The global benchmark crude was at a $9.85 premium over WTI for the same month.
Eleven OPEC members and 10 other countries are together trying to cut about 1.2 million barrels of daily production to balance the global oil market. While OPEC compliance last month was 86 percent, for the non-OPEC nations it was just 25 percent. Oil may find it hard to push higher if the non-OPEC producers including Russia continue to fall short, said Kiwoom’s Ahn.
Meanwhile, the U.S. is asking China to keep the yuan stable as part of the trade negotiations, a move aimed at neutralizing any effort by Beijing to devalue its currency to counter American tariffs, according to people familiar with the talks. A pledge of yuan stability has been discussed in multiple rounds of the discussions and both sides have tentatively agreed it will be part of the framework of any final deal, the people said.