Oil prices surged to a three-month high last week, as expectations for a US-China trade deal continued the enthusiasm stimulated by the news that Saudi Arabia was cutting production more aggressively than forecast.
After tumbling over 30 percent in the fourth quarter, Brent crude, the global standard, has jumped by better than a fifth this year in conjunction with the wider rebound in capital markets.
With some renewed optimism having been aroused by prospects that Washington and Beijing will avert an acceleration in trade tariffs.
The strength of this year’s oil recovery is encouraging money managers, jack-knifed by the severe drop in the fourth quarter, to develop into becoming a little more dynamic.
With Saudi Arabia’s disclosure, last week that it aimed to carry out greater than expected cuts to production injected further momentum into the rally. The kingdom said it would decrease production to about 9.8m barrels a day in March, more than 500,000 b/d below its pledged target under the deal agreed with global producers.
The resolution by OPEC and allies including, Russia in December, to decrease production was a marked turnaround from the drive to push supply in the midst of last year when US president Donald Trump urged the syndicate to curb rising prices. This year prices have again been lifted by US sanctions attempting to contain Iran’s nuclear aspirations and prompt a leadership battle in Venezuela, squeezing crude supplies from both countries.
With hopes for the trade deal and fewer OPEC barrels is proving sufficient for now to counteract fears over swelling US shale production. And at least in the short term then it would imply that not much remains in the path of oil now prices pushing for a test of $70.