Oil Hits 11-month High Near $57 As Saudi Supply Cut Supports
LONDON: Oil hit an 11-month high just below $57 a barrel on Tuesday as tighter supply and expectations for a drop in U.S. inventories offset concerns over rising coronavirus cases globally.
Saudi Arabia plans to cut output by an extra 1 million barrels per day (bpd) in February and March to keep inventories in check. The latest U.S. supply reports are expected to show crude stocks fell for a fifth straight week. [EIA/S]
Brent crude was up 59 cents, or 1.1%, at $56.25 a barrel by 1440 GMT after touching its highest since last February at $56.75. U.S. West Texas Intermediate (WTI) gained 47 cents, or 0.9%, to $52.72.
“Saudi Arabia in particular is ensuring, through its additional voluntary production cuts, that the market is undersupplied if anything,” said Eugen Weinberg of Commerzbank.
The Saudi cut is part of an OPEC-led deal in which most producers will hold output steady in February. Record cuts by OPEC and its allies last year helped oil to recover from historic lows in April. Some analysts see further gains as likely.
“We advise investors with a high risk tolerance to be long Brent or to sell its downside price risks,” said Giovanni Staunovo of UBS.
Oil also gained on the expectations for a drop in U.S. crude stockpiles. Analysts expect crude inventories to fall by 2.7 million barrels for a fifth straight week of declines.
The first of this week’s two supply reports, from the American Petroleum Institute, is due at 2130 GMT.
The prospect of increased economic stimulus in the United States lent further support. President-elect Joe Biden, who takes office on Jan. 20, has promised “trillions” in extra pandemic-relief spending.
However, oil price gains were capped by demand concerns as coronavirus cases rise around the world.
Chinese authorities introduced new curbs in areas surrounding Beijing on Tuesday and Japan is to widen a state of emergency beyond Tokyo.
(Additional reporting by Jessica Jaganathan; Editing by Kirsten Donovan and David Goodman)
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