Oil prices have soared by more than 5% after the US and China agreed to a 90-day truce in their trade war.

Expectations of potential supply cuts by the OPEC have also contributed to the cause of the price increase.

US light crude oil CLc1 increased by 5.7% to reach $53.85 per barrel, before falling to around $53. Brent crude LCOc1 climbed by 5.3% to $62.6, before settling at around $61.6, Reuters reported.

Julius Baer commodity research head Norbert Rücker was quoted by the news agency as saying: “From Argentina to Alberta, the oil market news is about supply curtailments. A brightening market mood will likely extend today’s price rally in the very near term.”

The temporary truce between Washington and Beijing was agreed during the G20 nations meeting during the weekend in Buenos Aires, Argentina.

As per the agreement, the countries decided not to impose additional trade duties for a period of at least 90 days. The truce will allow the countries to buy additional time to work on resolving their trade disputes.

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The news comes as a sigh of relief for markets. The Sino-US trade dispute impacted global trade, triggering concerns of an economic slowdown.

“The truce will allow the countries to buy additional time to work on resolving their trade disputes.”

Starting next month, the Canadian province of Alberta announced that it will force oil producers to reduce production by 8.7%, or 325,000 barrels per day (bpd) to tackle the issue of crude build up and low prices caused by pipeline bottleneck.

At the OPEC meeting later this week, OPEC members and Russia are expected to announce supply cuts to deal with emerging supply glut.

Brokerage FXTM chief market strategist Hussein Sayed told Reuters: “Markets are expecting to see a substantial production cut after Russian President Vladimir Putin said his country’s cooperation on oil supplies with Saudi Arabia would continue.”

Earlier today, Qatar Minister of State for Energy Affairs Saad al-Kaabi told reporters that the country will pull out of OPEC next month. Doha joined the producer club in 1961.