Australia shares touch 4-month high on trade optimism; NZ rises

* Higher oil prices support energy stocks

* Bank of Queensland drops on earnings forecast

* Westpac provides surprise quarterly earnings guidance

Feb 18 (Reuters) - Australian shares rose to their highest in more than four months on Monday, bolstered by rising optimism the United States and China would be able to reach an agreement to resolve their long drawn-out trade war.

The S&P/ASX 200 index rose 0.5 percent, or 29.6 points, to 6,095.70 by 0033 GMT, paring some earlier gains. The benchmark ended slightly higher on Friday.

Markets across the world took note of news that the United States and China had made progress after a week of high-level trade talks in Beijing, ahead of a March 1 deadline for reaching a deal.

“(Gains) pretty much led by all the commodities and the big banks, that’s been running quite well, and we see the rest of the sectors holding up on the trade deal optimism,” said Mathan Somasundaram, a Blue Ocean Equities market portfolio strategist.

Trade talks will resume this week in Washington. However, U.S. President Donald Trump repeated on Friday that he may extend the deadline for a deal and keep tariffs on Chinese goods from rising.

On the domestic front, Australia’s No. 2 lender Westpac Banking Corp surprised investors with a first quarter cash earnings update, putting the figure at A$2.04 billion ($1.46 billion).

Shares of the lender rose 0.9 percent. However, a smaller regional player Bank of Queensland bucked the market’s broader gains, falling as much as 6.3 percent to its biggest intraday percentage loss since April 2016.

The lender said it expected cash earnings in the current half to be lower than those of a year earlier, while cautioning that the second half would be challenging as inquiry-related costs are expected to mount.

“We see some pullback in the reporting stocks, but predominantly the big caps are pushing the index higher,” Somasundaram said.

Oil prices touched 2019 highs in early trade on Monday, amid OPEC-led supply cuts and U.S.-imposed sanctions on major producers such as Venezuela and Iran. The energy sub-index jumped 1.9 percent, to a near four-month high.

Santos Ltd and Oil Search were among the top gainers, up 1.9 percent and 2.2 percent, respectively.

Hopes of easing trade tensions propped up mining stocks, a sector that would benefit most as China is resource-rich Australia’s top trading partner.

Top miners BHP Group rose 1.5 percent while Rio Tinto climbed 2.1 percent.

New Zealand’s benchmark S&P/NZX 50 index rose 0.3 percent to 9,273.55.

Index heavyweight a2 Milk Company advanced 4.7 percent, while Port of Tauranga rose 4.2 percent on upbeat guidance.

For more individual stocks activity click on (Reporting by Nikhil Kurian Nainan, Additional reporting by Simran Lakhotia in Bengaluru; Editing by Jacqueline Wong)