Oil prices jump over 2% as OPEC set to extend supply cuts

The Philadelphia Energy Solutions oil refinery is seen at sunset in Philadelphia.

SINGAPORE (Reuters) - Oil prices rose more than $1 a barrel on Monday, with OPEC and its allies on track to extend supply cuts until at least the end of 2019 at their meeting in Vienna this week.

Front-month Brent crude futures, for September, touched an intraday high of $66.63 a barrel and were up $1.72, or 2.7%, at $66.46 a barrel by 0639 GMT.

U.S. crude futures for August climbed $1.52, or 2.6%, to $59.99 a barrel, after earlier hitting their highest in over five weeks at $60.13.

Iran on Monday joined top producers Saudi Arabia, Iraq and Russia in supporting a policy aimed at propping up the price of crude amid a weakening global economy.

The Organization of the Petroleum Exporting Countries, Russia and other producers, an alliance known as OPEC+, meet on Monday and Tuesday to discuss supply cuts. The group has been reducing oil output since 2017 to prevent prices from sliding amid a weakening global economy and soaring U.S. output.

Russian President Vladimir Putin said on Sunday he had agreed with Saudi Arabia to extend existing output cuts of 1.2 million barrels per day (bpd) by six to nine months.

Saudi Energy Minister Khalid al-Falih said the deal would most likely be extended by nine months and no deeper reductions were needed.

“While this needs to be ratified by the remaining members of the OPEC+ group, this appears to be a fait accompli,” ANZ analysts said in a note.

Stephen Innes, managing partner at Vanguard Markets in Bangkok, said oil prices could also be supported in the medium term because of geopolitical tensions in the Middle East and as China’s central bank eases monetary policy to offset the impact from U.S. tariffs.

Oil prices have come under renewed pressure in recent months from rising U.S. supplies and a slowing global economy.

U.S. crude oil output in April rose to a fresh monthly record of 12.16 million bpd, according to the U.S. Energy Information Administration, even though shale production growth likely peaked last year.

Meanwhile, financial markets were buoyed by a thawing of U.S.-China relations after leaders of the world’s two largest economies agreed on Saturday to restart trade talks.

Still, Citi analysts saw the announcements as a temporary truce to de-escalate the trade and tariff war, and were skeptical that both sides can reach a deal soon even though 90% of the trade deal has been completed.

“The fact that both sides have not been able to get the remainder of the deal done is difficult to comprehend, suggesting either the timing is not good or some may not want a deal,” they wrote in a note.