Oil pumps are seen after sunset outside Vaudoy-en-Brie, near Paris, France. Picture: REUTERS/CHRISTIAN HARTMANN
Oil pumps are seen after sunset outside Vaudoy-en-Brie, near Paris, France. Picture: REUTERS/CHRISTIAN HARTMANN

London — Oil prices rose on Monday, buoyed by Opec output cuts and reports that the US and China are inching closer to a deal on a tariff row that has slowed global economic growth.

International Brent futures were up 80c at $65.87 a barrel by 10.37am GMT. US West Texas Intermediate (WTI) crude futures were up 55c at $56.35 a barrel.

The US and China appear close to a deal that would roll back US tariffs on at least $200bn worth of Chinese goods, as Beijing makes pledges on structural economic changes and eliminates retaliatory tariffs on US goods, a source briefed on negotiations said on Sunday in Washington.

Hopes of an end to the trade spat between the two world’s biggest economies added support to a market that has been rallying for the past two months on cuts to production.

Supply from Opec fell to a four-year low in February, a Reuters survey found, as top exporter Saudi Arabia and its allies over-delivered on the group’s supply pact while Venezuelan output registered a further involuntary decline.

In the US there are signs that the oil production boom of the past years, which has seen crude output rise by more than 2-million barrels a day since early 2018 to more than 12-million barrels a day, may slow down.

US energy firms last week cut the number of oil rigs looking for new reserves to the lowest in almost nine months as some producers follow through on plans to cut spending despite an increase of more than 20% in crude futures so far this year. Hedge funds and other money managers raised their net long, or bullish, positions on Brent crude by 15,887 contracts to 291,336 in the week to February 26.

“While much of the move higher in the market has come about due to short covering, in more recent weeks we have seen fresh longs starting to return to the market, suggesting that sentiment is turning more positive,” bank ING said.

But demand side pressure may put a cap on further rises.

“Refineries are now clearly winding down for maintenance ... That means softer crude off-take by refineries and softer signals from crude oil spot prices ...” said chief commodities analyst at SEB bank Bjarne Schieldrop.