UPDATE 11-Oil hits 2019 highs on U.S.-China trade hopes, but U.S. output weighs

* China struggle to bridge trade gaps, more time seen likely

* U.S. oil output hits 12 mln bpd: https://tmsnrt.rs/2VegNR3

* Output in U.S. to reach 13 mln bpd by end-2019 -Citi

* U.S. oil drillers cut rigs for first week in three -BakerHughes (Adds settlement prices, market activity)

By Laila Kearney

NEW YORK, Feb 22 (Reuters) - Oil prices touched theirhighest since mid-November on Friday and posted weekly gains forthe second week in a row, boosted by hopes that U.S.-China tradetalks would soon produce a deal, although new record U.S. oilsupply limited gains.

Brent crude futures LCOc1 briefly reached $67.73 a barrel,their 2019 high. The global benchmark fell 5 cents to settle at$67.12 a barrel. Brent gained 1.2 percent on the week.

U.S. West Texas Intermediate (WTI) crude futures CLc1 gained 30 cents to settle at $57.26 per barrel, after hitting$57.81 earlier on Friday, also their highest for the year. WTIrecorded a 3-percent weekly rise and reached its strongestsettlement price of 2019.

Top U.S. and Chinese trade negotiators met on Friday to wrapup a week of talks that have seen the two sides struggle toreach a deal by a March 1 deadline.

U.S. President Donald Trump will meet with Chinese VicePremier Liu He at the Oval Office later on Friday.

"Oil prices, as well as the stock market have been rising onthe anticipation that China and the U.S. would agree to a tradedeal," said Andy Lipow, president of Lipow Oil Associates inHouston. "In addition, we're seeing a tightening of oil suppliesaround the world resulting from OPEC and non-OPEC productioncuts."

Both oil benchmarks have risen this year after theOrganization of the Petroleum Exporting Countries and itsallies, including Russia, began to cut output to prevent asupply glut from growing.

Surging U.S. crude oil production C-OUT-T-EIA , is partlyoffsetting OPEC's cuts.

U.S. crude production last week climbed to a record 12million barrels per day as stockpiles built for a fifth straightweek to their highest since October 2017 and exports hit anall-time high, the Energy Information Administration said onThursday. EIA/S

"We see total U.S. crude production hitting 13 million bpdby year-end, with 2019 averaging 12.5 million bpd," U.S. bankCiti said following the release of the EIA report.

However, U.S. energy firms cut four oil rigs operating thisweek after three weeks of adding rigs, General Electric Co'sGE.N Baker Hughes energy services firm said in its report onFriday. RIG/U

Meanwhile, crude inventories in West Texas fell to thelowest in four months after an additional pipeline startedtransporting crude from the largest U.S. shale field to the GulfCoast, largely for exports, data from market intelligenceprovider Genscape showed.

With U.S. supply surging, Goldman Sachs said it expectednon-OPEC supply to grow by 1.9 million bpd this year, more thanoffsetting the OPEC cuts.

That means much will depend on demand, which Goldman said itexpected to grow by 1.4 million bpd in 2019. Goldman said itexpected an average Brent price of $60-$65 per barrel in 2019and 2020.

Money managers cut their net long U.S. crude futures andoptions positions in the week to Feb. 5, the U.S. CommodityFutures Trading Commission (CFTC) said on Friday.


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