LONDON (Reuters) – Oil hit an 11-month high towards $ 57 a barrel on Tuesday as tighter supply and expectations of a decline in U.S. inventories offset concerns over coronavirus cases rising to the global.
Saudi Arabia plans to cut production by an additional 1 million barrels per day (bpd) in February and March to stop inventories from build. The latest US supply reports are expected to show that crude oil inventories have fallen for the fifth consecutive week. [EIA/S]
Brent crude was 75 cents, or 1.4%, higher at $ 56.41 a barrel by 1022 GMT and previously hit $ 56.75, the highest since last February. US West Texas Intermediate (WTI) earned 86 cents, or 1.7%, to $ 53.11.
“Saudi Arabia, in particular, is ensuring, through its additional voluntary production cuts, that the market is under supply, if anything,” Commerzbank’s Eugen Weinberg said.
The Saudi cut is part of an OPEC-led deal in which most producers will keep production stable in February. Record cuts by OPEC and its allies in 2020 helped oil recovery from all-time lows in April. Some analysts believe further gains are likely.
“We advise investors with a high risk appetite to be long on Brent or to sell its price risks to the downside,” UBS’s Giovanni Staunovo said Tuesday in a report.
Oil also gained on the expectation of a decline in US crude inventories. Analysts expect crude oil inventories to decline by 2.7 million barrels for the fifth consecutive week of declines.
The first of two supply reports this week, from the American Petroleum Institute, is expected at 2130 GMT.
The prospect of greater economic stimulus in the United States has provided further support. President-elect Joe Biden, who takes office January 20, has pledged “trillions” of extra pandemic relief expenses.
Concerns over demand due to the increase in coronavirus cases around the world have limited earnings.
Chinese authorities introduced new curbs in areas surrounding Beijing on Tuesday, and Japan intends to expand the state of emergency beyond Tokyo.
Additional reporting by Jessica Jaganathan; Editing by Kirsten Donovan