Oil surges 3pct on OPEC glut-cut plan

Oil prices have jumped about 3 per cent, rising after OPEC detailed specifics on its production-cut activity to ease global oversupply, and on signs of progress in ending the US-China trade war.

Brent crude was up $US1.52 to settle at $US62.70 a barrel, or 2.48 per cent.

US West Texas Intermediate crude futures added $US1.73 to settle at $US53.80 a barrel, or 3.32 per cent.

The futures benchmarks posted their third straight week of gains, rising about 4.0 per cent since the close since the previous Friday.

The Organisation of the Petroleum Exporting Countries released a list of oil production cuts by its members and other major producers starting on January 1 2019 to boost confidence in its oil supply reduction pact.

‘It’s going to send a signal to the market that they’re serious,’ said Phil Flynn, an analyst at Price Futures Group in Chicago.

‘And it’s probably going to use some peer pressure to make sure compliance stays strong.’

The producer group agreed in December to cut 1.2 million barrels per day to support oil prices and shrink an oil glut at a time of rising supply, especially from the United States.

On Thursday, OPEC’s monthly report showed it had made a strong start in December before the pact went into effect, implementing the biggest month-on-month production drop in almost two years.

US drillers cut 21 oil rigs this week, the biggest decline since February 2016.

The rig count, an indicator of future production, fell to 852, the lowest since May 2018, General Electric Co’s Baker Hughes energy services firm said in its closely followed report.

Fresh signals that Washington and Beijing might be nearing the end of their tariff fight also boosted markets.

‘The oil market has been taking the US-China trade war the hardest because China is so central to the demand side of the equation,’ said John Kilduff, partner at Again Capital Management.

‘This is what the market is looking to seize upon to get past this bump in the road.’

A Bloomberg report showed China offered to go on a buying spree of US goods, which investors saw as an attempt to draw closer to a trade deal with Washington.

Reuters reported on January 9 that US officials demanded during trade talks in Beijing more details about China’s pledge to make big purchases of American goods.

China offered similar commitments on a smaller scale during talks in Washington last May.

The International Energy Agency kept its estimate of oil demand growth unchanged and close to 2018 levels despite saying US oil production growth, combined with a slowing global economy, would weigh on oil prices.