Oil prices were up more than 2 per cent overnight on steep OPEC production cuts, with its de-facto leader Saudi Arabia planning to drop March crude output by more than a half a million barrels per day below its initial pledge.

Rising investor optimism for a breakthrough in the latest round of US-China trade discussions also boosted futures.

Brent crude futures gained $US1.42, or 2.3 per cent, to $US62.93 a barrel.

US West Texas Intermediate (WTI) crude oil futures rose $US1.20, or 2.3 per cent, to $US53.61 a barrel.

Production cuts implemented on January 1 by the Organisation of the Petroleum Exporting Countries and allies led by Russia have tightened markets in the face of rising output in non-member countries, including the United States.

OPEC said overnight it had reduced oil production almost 800,000 bpd in January to 30.81 million bpd under its voluntary global supply pact.

Saudi Arabia Energy Minister Khalid al-Falih told the Financial Times that the kingdom would reduce cut production to about 9.8 million bpd in March to bolster oil prices.

Investors were also hopeful that a new round of talks between US and Chinese officials would bring the two sides close to resolving their ongoing trade war ahead of a March 1 deadline.

‘The potential for, maybe, an agreement between the US and China has pushed prices higher,’ said Tom Saal, senior vice president at INTL FCStone in Miami.

US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer arrived in Beijing on Tuesday before high-level talks set for later in the week.

The fact that top ranking officials were entering the negotiations ‘elevated the expectations a little higher’ for a deal, Saal said.

If the two sides do not come to an agreement by the deadline, US tariffs on $US200 billion worth of Chinese imports are scheduled to increase to 25 per cent from 10 per cent.

Rising US oil production, fighting near Libya’s main oilfield, sanctions on Venezuela and suspense over whether the US will grant more waivers to import Iranian oil have left markets unsure about broader supply.

US crude stockpiles were forecast to have risen last week for a fourth straight week, ahead of data from the American Petroleum Institute (API), an industry group on Wednesday morning.

The Energy Information Administration will issue its report on Wednesday.

Also overnight, OPEC cut its forecast for 2019 world oil demand, citing slowing economies and expectations of faster supply growth from rivals, underlining the challenge it faces in preventing an oil glut.

Bank of America warned of a ‘significant slowing’ in global growth.