Investing.com - Oil prices pressed higher on Monday as signs of supply reductions and hopes that the U.S. and China may resolve their trade dispute spurred bets of a market rebalancing, sparking a recovery in crude following one of the worst annual declines in three years.
New York-traded West Texas Intermediate crude futures rose 35 cents, or 0.63%, at $56.33 a barrel by 9:34 AM ET (14:34 GMT). That was off the intraday peak of $56.73, its best level since November of last year.
Meanwhile, Brent crude futures, the benchmark for oil prices outside the U.S., traded up 3 cents, or 0.05%, to $66.28. The intraday high of $66.84 was also its best level since last November.
A roller coaster year in 2018 saw oil prices tumble from nearly four-year highs, as West Texas Intermediate oil lost half its value in the space of just three months. U.S. crude fell 25% last year while Brent slumped nearly 20%, making it the largest annual loss for oil since 2015 as shortage concerns turned to worries of oversupply at a time when the global economy showed signs of a slowdown.
Responding to the threat of the return of the global supply glut, OPEC and a group of 10 producers outside the cartel, led by Russia, agreed to collectively cut production by a total of 1.2 million barrels per day during the first six months of 2019.
Top exporter and OPEC's de-facto leader Saudi Arabia recently pledged to cut even more production than the deal called for.
“OPEC production cuts and U.S. sanctions on both Iran and Venezuela are limiting supply,” Jasper Lawler, head of research at London Capital Group, insisted.
U.S. President Donald Trump also boosted confidence after saying over the weekend that talks with China are “going extremely well,” and that Washington is closer than ever before to “having a real trade deal”.
Trump added that he would remove tariffs if the two sides could reach an agreement.
“Trade tensions which have weighed on global growth are showing signs of easing boosting sentiment across markets and lifting oil demand prospects," Lawler explained.
The trade dispute between the world’s two largest economies has been widely blamed for a lack of business confidence, hindering growth amid the uncertainty and taking its toll on the outlook for oil demand.
Consultancy JBC Energy commented in a note that its calculations “do tell us that we are looking at the tightest (first half) crude balance in many years and, as such, a certain degree of price support does simply make sense for the time being.”
PVM Oil Associates analyst Tamas Varga warned that there are still many pending uncertainties that could have a negative impact on oil prices.
“Latest available data, however, point in the direction of a tightening market. It is not recommended to swim against the current and presently the 'oil' river is flowing north,”
In other energy trading, gasoline futures fell 0.18% to $1.5700 a gallon by 9:44 AM ET (14:44 GMT), while heating oil slipped 0.06% to $2.0191 a gallon.
Lastly, natural gas futures traded up 0.38% to $2.635 per million British thermal unit.
-- Reuters contributed to this report.