WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest to delivery and Intercontinental Exchange Brent posted gains in early morning trading on Tuesday, rising on the hope that OPEC would agree on a production cut during this week's Organization of the Petroleum Exporting Countries meeting in Vienna.
Nymex January West Texas Intermediate contract edged $0.50 higher on the spot chart to $53.45 per barrel (bbl), while ICE February Brent crude futures gained $0.93 to a $62.63 bbl two-week high on the spot chart.
The main driver behind the oil futures rally is the market expectation for a favorable deal to cut production at the meeting by OPEC and 10 non-OPEC oil producing countries led by Russia on Thursday and Friday when producers will debate extending their two-year production agreement into 2019. During a Saturday news conference in Buenos Aires, Argentina, Russian President Vladimir Putin said that Russia would go along with output curbs, although no specific levels have been agreed on.
"We have an agreement to extend our deal," Putin said on Saturday after a meeting with Saudi Crown Prince Mohammed Bin Salman in Argentina. "There is no final decision on volumes, not yet."
The comments suggest a deal is highly likely later this week. An OPEC panel recommended a production cut of 1.3 million barrels per day (bpd) from October output rates, which were 4% more than the 2016 Vienna agreement. Saudi Arabia has already said it would cut output 500,000 bpd in December, with Saudi production at 11.0 million bpd in November 1.0 million bpd more than the 2016 agreement.
U.S. President Donald Trump and China's President Xi Jinping reached a 90-day agreement to delay additional U.S. tariffs on $200 billion of Chinese imports that were set to take effect Jan. 1, 2019. According the White House, China has agreed to purchase "a substantial" amount of U.S. products to narrow a trade imbalance with the United States. The agreement was widely hailed as a "truce" in the trade war between the world's two largest economies and prompted a relief rally in equities and oil futures.
According to a new bullish data released by the Institute of Supply Management, U.S. manufacturing continues to expand with the U.S. industrial manufacturing purchasing managers index was reported at 55.3 in November, with orders for exports at a nine-month high, and reported its manufacturing index surged from 57.7% to 59.3%. However, overall global manufacturing remained lackluster in November, weakened by slow growth in China and the eurozone. Nikkei manufacturing PMI in India was recorded at the highest level for the year in November, bolstering the world's fastest growing economy after the expansion pace was slowed in the third quarter by high oil prices.
The Energy Information Administration will delay its supply report for the final week of November until 11 a.m. ET Thursday in observance of the National Day of Mourning for President George H.W. Bush. The 41st president died Nov. 30 at the age of 94.
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