Oil prices rose on Tuesday after a media report showed that OPEC oil production had fallen to an eight-year low in September and as optimism over renewed US-China trade talks boosted investor sentiment.
Benchmark Brent crude prices rose nearly 1.2 percent to $59.95 per barrel, while prices of US crude (WTI) inched up 1.15 percent to $54.69 a barrel.
China’s top trade negotiator will lead an upcoming 13th round of talks aimed at resolving a trade war with the US, the Associated Press reported on Monday, citing a senior Chinese official.
“Oil has rebounded today on a combination of trade talk optimism and talk that OPEC production had fallen in September,” Jeffrey Halley, a senior market analyst for Asia Pacific at forex trading platform OANDA in Singapore, told Al Arabiya English.
A Reuters survey from Monday showed that OPEC oil production fell to 28.9 million barrels per day (bpd), down 750,000 bpd from August’s revised figure.
This comes after OPEC, Russia, and other non-members, known as OPEC+, agreed in December to reduce supply by 1.2 million bpd from Jan. 1 this year. OPEC’s share of the cut is 800,000 bpd, to be delivered by 11 members – exempting Iran, Libya and Venezuela.
Sources told Reuters that output from Russia, which now plays a key role in stabilizing global oil prices along with top exporter Saudi Arabia, fell to 11.24 million bpd in September from 11.29 million bpd a month ago.
In July, US crude oil output fell to 11.81 million bpd, compared to 12.08 million bpd in June, according to the latest report from the US Energy Information Administration. A drop in US crude prices and investor pressure to boost returns have pressured margins at shale firms, prompting them to cut production and abort the drilling of new wells.
But, the oil price spike may be short-lived. According to Halley, it is hard to see the rally continuing as excess supplies and returning Saudi production combined with global economic worries will limit gains.
“Oil has now entirely retraced its Saudi attack led rally, suggesting that economics, not geopolitics, is the longer-term driver for oil,” he told Al Arabiya.
Saudi Aramco’s key oil-processing facilities in Abqaiq and Khurais were attacked on September 14 by drone strikes, which knocked off about five percent of global energy supply and sent global crude oil prices up by as much as 20 percent.
Last week, Reuters reported that Saudi Arabia had restored its oil production capacity earlier than expected to 11.3 million barrels per day after the attacks on its oil-processing facilities.