Crude oil began trading today with a 5-percent gain following favorable reports from G20, where Presidents Trump and Xi agreed on a 90-day truce and Russia's Vladimir Putin said Russia will extend its cooperation on production with OPEC into 2019.
Effectively, this means Russia will take part in the production cuts that are to be discussed at the Vienna meeting of OPEC+ this week, although Putin added that the size of the cut Russia will enforce has yet to be determined.
The Trump-Xi truce, for its part, had a favorable effect on prices especially because it envisaged China opening its markets for more energy imports, among others. Also, the two sides agreed to freeze tariffs where they are for three months, while negotiations continue. While crude oil has not been included in the tariff lists, the possibility of this happening has made traders jittery. Now, for three months at least, they will have one less thing to worry about.
In fact, they may have two things less to worry about as after Putin's statement regarding the production cuts, these are now much more likely: after scoring the continued support of Russia it would be easier for Saudi Arabia to convince the rest of OPEC to cut. Still, there are four more days until the Vienna meeting and nothing is certain yet. If cuts are agreed, analysts expect them at 1-1.4 million bpd.
Meanwhile, West Texas Intermediate received an additional boost from an announcement by Alberta's Premier, Rachel Notley, that the province will cut crude oil production by over 300,000 bpd in order to clear excess supply in storage and arrest the decline in prices. The cut will be in place temporarily, until the excess clears and then it will be reduced to less than 100,000 bpd, to be in place until end-2019.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More