Futures Movers: Oil prices gain on Saudi production-cut pledge, hope for U.S.-China trade pact

Crude-oil futures extended a climb above a one-week high on Wednesday, as reports of further reductions to global output and optimism around constructive trade negotiations between the U.S. and China helped to bolster prices.

U.S. benchmark March West Texas Intermediate crude oil CLH9, +0.85% added 63 cents, or 1.3%, to trade at $53.72 a barrel on the New York Mercantile Exchange. April Brent crude LCOJ9, +1.19% the international benchmark, gained 94 cents, or 1.5%, to $63.36 a barrel. Both contracts settled at their highest levels since Feb. 6 on Tuesday, FactSet data show.

De facto leader of the Organization of the Petroleum Exporting Countries, Saudi Arabia, pledged to cut output further in the coming months, according to the Financial Times (paywall), citing oil minister Khalid al-Falih, who said the country would cut an additional 500,000 barrels a day to take production to 9.8 million barrels a day in March.

“This would be [approximately] 500,000 barrels per day less than stipulated in the production cuts agreement, meaning significant over compliance with the requirements,” said analysts at Commerzbank in a research note.

The further gains for crude come after a monthly U.S. Energy Information Administration report released Tuesday revealed higher U.S. crude production forecasts for 2019 and 2020. The report also included higher WTI and Brent forecasts for this year, but reduced the 2020 price views for both benchmarks by more than 4%.

Also on Tuesday, OPEC said its crude output fell by 797,000 barrels a day in January, month on month, to average 30.81 million barrels a day, in the cartel’s separate monthly production update.

President Trump on Tuesday said he is willing to delay a March 1 deadline for resolving the U.S.’s trade conflict with China if negotiations with Beijing are progressing smoothly. A high-level U.S. delegation led by Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will hold talks on Thursday and Friday with Chinese Vice Premier Liu He, the top economic adviser to President Xi Jinping.

Looking ahead, EIA weekly inventory are expected at 10:30 a.m. Eastern Time to show a rise of 2.7 million barrels in crude stockpiles for the week ended Feb. 8, according to an S&P Global Platts survey. They also expect supplies of gasoline to add 800,000 barrels, but distillates were seen down 800,000 barrels. That data comes after a private industry group, the American Petroleum Institute late Tuesday, showed that weekly inventories in the U.S. unexpectedly declined by around 998,000 barrels in the latest week, according to sources. The API also reportedly showed that gasoline stockpiles rose by 746,000 barrels, while distillate inventories declined by 2.5 million barrels.

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