Saudi-led OPEC and Russian Federation agreed on December 7 to curb their total crude oil production by 1.2 mbpd beginning on January 1 for six months, but the plan so far has had little impact on crude prices.
Brent crude futures gained 69 cents, or 1.22 percent, to $58.02 per barrel by 1325 GMT.
With oil futures having gained over 7 percent since last Monday, Jim Ritterbusch, president of Ritterbusch and Associates, said in a note that, "We continue to view the OPEC production cuts that became official last week as a legitimate bullish consideration and we still look for the reduction to translate to a reduced USA crude surplus that could potentially be erased in some 8-9 weeks".
"Momentum is coming back into the market from very depressed price levels", Petromatrix strategist Olivier Jakob said. Confidence is growing that the Organization of Petroleum Exporting Countries and allied producers will start pledged production cuts this month, led by Saudi Arabia.
Apicorp noted that the cuts to production undertaken by Opec and allies may not be sufficient to balance the market, which may see build up of inventory levels, particularly as USA shale is expected to top 12 million bpd during the second half of the year. Meanwhile, U.S. crude inventories were estimated to have declined.
The US production of shale oil, which has added 5 mmbbl of oil to US output over the last decade to move America onto a similar level as Saudi Arabia and Russian Federation at around 11 mmbbl a day, has put a consistent downward pressure on oil prices in recent years.
American crude stockpiles probably declined by 1.75 million barrels last week, according to a median estimate in a Bloomberg survey of analysts ahead of government data on Wednesday.
US crude inventories at Cushing, Oklahoma, the delivery point for USA crude futures, fell by 565,000 barrels from last Tuesday to Friday, traders said, citing data from market intelligence firm Genscape.
"Surely, there will be more twists and turns in the saga and increasing USA tariffs on Chinese goods after March from 10 percent to 25 percent can not be excluded", Tamas Varga of PVM Oil Associates said.
Traders hoping for a fast end to the trade dispute were encouraged late Monday by comments from U.S. Commerce Secretary Wilbur Ross who said that Beijing and Washington could read a trade deal that "we can live with".
Goldman Sachs said in a note it had downgraded its average Brent crude oil forecast for 2019 to $62.50 a barrel from $70 due to "the strongest macro headwinds since 2015".
"Spot prices will continue to recover with Brent backwardation set to return by summer as inventories eventually revert to 5-year average levels".