As of 2:30 p.m. New York time U.S. benchmark West Texas Intermediate was up 3.04% to $52.48 a barrel. International benchmark Brent crude gained 2.84% to break back above $60 a barrel at $61.15.
Part of the reason for the gain is a general sigh of relief that the result of the Saturday meeting between U.S. President Donald Trump and Chinese President Xi Jinping was a truce of some sort (the terms vary depending on which side is doing the talking) postpones further damage to the global economy for 90 days. Stronger global economic growth is good for global oil demand. Hence the climb in oil prices.
But there’s much more going on today.
At the same Group of 20 meeting that saw the Trump-Xi dinner, Saudi Crown Prince Mohammed bin Salman and Russian President Vladimir Putin agreed to extend their cooperation in setting production goals for OPEC & Friends. The agreement didn’t say anything about specific production targets or any reductions in production, but cooperation between Russia and Saudi Arabia is key to any agreement to reduce production at this week’s OPEC meeting. Call the deal necessary to a production cut but not sufficient to deliver one. In talks between the two countries since then Russia has offered to cut production by 150,000 barrels a day. That would leave their country shouldering too large a portion of any cuts, the Saudis have argued. But at least this puts Russia and Saudi Arabia both on the “cut production” side of the ledger.
And then finally among the reasons for today’s oil price gains, Alberta, Canada’s biggest oil producing province, announced that it will cut oil production next year to 325,000 barrels a day, of 8.7%, until excess oil is storage is drawn down. At that point the cut in production would drop to 95,000 barrels a day.
Stocks of U.S. oil producers have soared today on this news cocktail. For example, Jubak’s Picks members Pioneer Natural Resources (PXD), Equinor (EQNR), and Diamondback Energy (FANG) were up 3.82%, 4.11%, and 1.13%, respectively as of 2:30 p.m. New York time.