Oil prices rise on trade talk optimism, OPEC cuts

Oil prices rise on trade talk optimism, OPEC cuts

Looming over the OPEC-led cuts, however, is a surge in USA oil supply, driven by a steep rise in onshore shale oil drilling and production. In the last seven sessions, oil advanced more than 11 percent, erasing December's loss.

The U.S. and China are also entering what could be called round two of its existing trade war, kicked off mid-last year when President Trump slapped fresh tariffs on Chinese goods.

Brent crude futures LCOc1 rose $1.39 a barrel, or 2.4 percent, to $58.72.

At 0847 GMT, February WTI crude oil is trading $48.63, up $0.11 or +0.22% and March Brent crude oil is at $57.50, up $0.17 or +0.30%. If the worst can be avoided, there is a lot more room to the upside for crude prices, particularly since oil traders have grown pessimistic about the fate of the global economy.

The talks are going well so far and will continue on Wednesday, U.S. delegation member Steven Winberg said.

"If compliance by OPEC and the allied non-OPEC countries is similarly high as in the agreement two years ago, the oil market is likely to be rebalanced during the first half year", Commerzbank said in a note.

"In the last few months of 2018, the tensions between fundamentals, sentiment and prospects about the macro environment all shaped price behaviour and this will continue in 2019", it added in its report.

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U.S. West Texas Intermediate (WTI) crude oil futures CLc1 settled up $1.26, or 2.6 percent, at $49.78 a barrel.

OPEC and its oil-producing allies, including Russian Federation, reached an agreement to slash oil production by a total of 1.2 million bpd on December 7, in a bid to shore up falling prices due to fears of oversupply.

Investor confidence grew as trade talks showed signs of progress. "They can be very convincing when they choose to be".

The crude prices have declined by 40% after declaring the 4 year high, which was over $76 per barrel.

Since the turn of the year investors holding oil have been helped by Opec's output cuts. The current round of talks are scheduled to continue through January 8, with more senior-level discussions likely later this month.

Because of record US crude oil production C-OUT-T-EIA of 11.7 million bpd, American fuel stockpiles are rising, according to weekly data by the Energy Information Administration (EIA). U.S. inventories are near their lowest level in nearly two months.

Rising production from North American shale basins, particularly the U.S., which surged past 11 million bpd in August, outpaced sovereign producers Saudi Arabia and Russian Federation and was one of the factors behind the market's oversupply, the report said.

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