LONDON: Oil prices gained nearly 2 percent on Tuesday, supported by OPEC-led production cuts which Saudi Arabia said it would surpass by over half a million barrels per day (bpd) and by U.S. sanctions against Iran and Venezuela.
Brent crude futures were up US$1.17 or 1.9 percent at US$62.68 a barrel by 1135 GMT. U.S. West Texas Intermediate (WTI) crude oil futures rose 89 cents or 1.7 percent to US$53.30.
Markets are tightening because of voluntary production cuts, effective since Jan. 1, led by the Organization of the Petroleum Exporting Countries and allies including Russia aimed at forestalling a global glut.
Saudi Arabia, the world's top oil exporter and de facto leader of OPEC, said it would reduce crude production to around 9.8 million bpd in March, over half a million bpd more than it originally pledged.
Energy Minister Khalid al-Falih announced the move in an interview with the Financial Times published on Tuesday, as the kingdom seeks to drive up oil prices to help fund an economic transformation plan.
OPEC's monthly oil market report for February will be issued at 1225 GMT on Tuesday.
Also on the radar are hopes expressed by U.S. and Chinese officials that a new round of talks, which began in Beijing on Monday, would bring them closer to easing their months-long trade war.
Beijing and Washington are trying to hammer out a deal before a March 1 deadline, without which U.S. tariffs on US$200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent.
However, rising U.S. oil production, fighting near Libya's main oilfield, sanctions on Venezuela and suspense over whether Washington will grant more waivers to import Iranian oil leave markets unsure about broader supply.
"We believe that oil is not pricing in supply-side risks lately as markets are currently focused on U.S.-China trade talks," JP Morgan said in a weekly note.
Should U.S.-China talks succeed, the U.S. bank said oil markets would "switch attention from macro concerns impacting future demand growth to physical tightness and geopolitical risks impacting immediate supply".
Any economic slowdown could cap oil markets.
Bank of America also warned of a "significant slowing" in global growth, adding that it expects Brent and WTI to average US$70 and US$59 a barrel respectively in 2019 and US$65 and US$60 in 2020.
(GRAPHIC: U.S. oil production & drilling levels - https://tmsnrt.rs/2Tm4u4I)
(Reporting by Noah Browning; Additional reporting by Henning Gloystein; Editing by David Goodman and Dale Hudson)