WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange West Texas Intermediate and Intercontinental Exchange Brent futures continued higher, rallying in early Monday trading after five consecutive advances on the start of trade negotiations between the United States and China while Saudi Arabia cuts crude production.
Nymex February WTI futures shifted $1.42 higher to trade around $49.38 barrel (bbl), while ICE March Brent registered $1.23 advance to $58.29 bbl. NYMEX February ULSD futures gained 4.58 cents to $1.8150 gallon and February RBOB futures rallied 3.68 cents to a $1.3846 at the start of Monday trading session.
WTI, Brent futures advances come amid the start of trade negotiations between the United States and China held in Beijing this week. The two-day meeting is the first between the delegations from both countries in an effort to resolve longstanding trade disagreement since Dec. 1 that have disrupted the trade between the world's largest economies since the start of 2018.
On Dec. 1, U.S. President Donald Trump and Chinese President Xi Jinping met in Argentina, when they agreed to a 90-day truce in their trade dispute.
According to Bloomberg, Chinese Vice Premier Lie He, a top economic advisor to Xi, was among attendees. Lie's appearance was unexpected, with this week's meetings between mid-level delegates. Senior delegates will meet later this month.
Crude future prices were also supported by a sharp drop in output from Organization of the Petroleum Exporting Countries in December reported last week, with larger-than-expected cuts from Saudi Arabia driving the decline. According to a Reuters' survey, OPEC's oil supply fell 460,000 barrels per day (bpd) in December to 32.68 million bpd, the steepest decline in output by the cartel since January 2017.
Saudi Arabia is expected to do the heavy lifting in meeting terms of an OPEC six-month agreement in cutting production 1.2 million bpd agreed to at an early December meeting that took effect last week. OPEC member nations will cut production by 800,000 bpd, mostly shouldered by Saudi Arabia, while non-OPEC producers, led by Russia, will cut production by 400,000 bpd. Libya, Venezuela and Iran are exempt from cuts.
Saudi oil minister Khalid al-Falih said last week that it would pump 10.2 million bpd in January, 100,000 bpd less than 10.3 million bpd agreed upon at OPEC's December meeting. Bloomberg reported that Saudi crude production was 10.65 million bpd in December, down from November's record high level of 11.07 million bpd. As Saudi Arabia cuts output, Saudi crude exports to the United States dropped 60% in December to 350,000 bpd from more than 800,000 bpd in November.
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