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Oil prices rose more than 1 per cent on Tuesday after the Organization of the Petroleum Exporting Countries (OPEC) figures showed it cut production sharply in January, and as lead member Saudi Arabia said it would reduce its output in March by an additional 500,000 barrels.
Growing investor optimism for a breakthrough in the latest round of United States (US)-China trade discussions also boosted futures as members of both sides met in Beijing.
Brent crude futures gained 91 cents, or 1.5 per cent, to settle at $62.42 a barrel. US West Texas Intermediate (WTI) crude oil futures rose 69 cents, or 1.3 per cent, to settle at $53.10 a barrel.
Production cuts effective to the end of June by the OPEC and allies led by Russia have tightened markets despite rising output in non-member countries, primarily the US.
OPEC said on Tuesday it had reduced oil production almost 800,000 barrels per day (bpd) in January to 30.81 million bpd under its voluntary global supply pact.
Saudi Arabia Energy Minister Khalid al-Falih told the Financial Times that the country would cut production to about 9.8 million bpd in March to bolster prices. As part of the OPEC deal, that nation pledged to cut output to about 10.3 million bpd.
“The market was bid on the OPEC report, the OPEC numbers themselves, and Saudi Arabia bringing the production numbers down pretty good,” said Bob Yawger, director of energy futures at Mizuho.
Investors were also hopeful that a new round of US-China talks this week would bring the two sides close to resolving their ongoing trade war ahead of a March 1 deadline, Yawger said.
US President Donald Trump said he could push off the deadline to hike tariffs on Chinese imports if the two sides get close enough to striking a deal.
The Energy Information Administration said on Tuesday it expected US crude production to hit a new record of 13.2 million bpd through 2020, which took some steam out of the rally, traders said.
OPEC also cut its forecast for 2019 world oil demand, citing slowing economies and expectations of faster supply growth from rivals, underlining the challenge it faces in preventing an oil glut.
US crude stockpiles were forecast to have risen last week for a fourth straight week, ahead of data from the American Petroleum Institute (API), an industry group, at 4:30 pm.
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