Oil extended gains as OPEC crude output dropped before the group and its allies meet this week to set the path for future production cuts.
Futures added 0.5% in New York even as Asian stocks declined following the announcement of fresh tariffs by President Donald Trump. Output from the Organization of Petroleum Exporting Countries slipped by 110,000 barrels a day last month, according to data compiled by Bloomberg, while analysts forecast U.S. crude fell last week for the first time since mid-October.
Crude has climbed since early October on signs the U.S.-China are close to a breakthrough on an initial trade deal. Iraq said on Sunday that OPEC+ may consider deepening output cuts, contrary to expectations, while Saudi Arabia has signaled it will no longer tolerate cheating by other members on quotas.
“OPEC+ doesn’t seem like it’s going to make a further cut in its agreed output,” Kim So Hyun, a commodities strategist at Daishin Securities Co., said by phone in Seoul. “If the group extends the current plans without making deeper cuts, prices are likely to retreat to near $50 a barrel.”
West Texas Intermediate for January delivery added 28 cents to $56.24 a barrel on the New York Mercantile Exchange as of 7:40 a.m. in London. The contract rose 1.4% to close at $55.96 on Monday.
Brent for February settlement gained 22 cents, or 0.4%, to $61.14 a barrel on the London-based ICE Futures Europe Exchange. The contract added 43 cents to close at $60.92 on Monday. The global benchmark crude traded at a $4.92 premium to WTI for the same month.
The drop in OPEC’s production last month was led by Angola, which has been suffering a decline for the past four years. The nation’s output fell to the lowest in more than a decade. Iran’s output, already squeezed to the lowest since the 1980s by U.S. sanctions, dwindled even further.
U.S. crude inventories probably shrank by 1.5 million barrels last week, according to a Bloomberg survey. If that’s confirmed by Energy Information Administration data on Wednesday, it would be the first decrease in six weeks.