NEW YORK (Reuters) – Oil hit an 11-month high just below $ 57 a barrel on Tuesday, supported by Saudi Arabia’s plans to limit supply, offsetting concerns that coronavirus cases rise to the global economy would reduce fuel demand.
Brent crude oil was up 90 cents, or 1.6%, to $ 56.56 a barrel by 1118 EST (1618 GMT) after hitting its highest since last February at $ 56.75. US West Texas Intermediate (WTI) earned 82 cents, or 1.6%, to $ 53.07.
Saudi Arabia plans to cut production by an additional 1 million barrels per day (bpd) in February and March to keep inventories in check.
The Saudi cut is part of an OPEC-led deal in which most producers will keep production stable in February. Last year’s record cuts from OPEC and its allies helped the oil recovery from historic lows reached in April. Some analysts believe the oil complex is underestimating supply levels.
“Storage in Cushing is only 10.2 million barrels below the all-time high, so there are no problems with supply here in the US, but the complex is responding positively to this under-supply rumor,” Bob said. Yawger, director of energy futures at Mizuho.
Oil also gained on expectations 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 scheduled for 4:30 PM EST (2130 GMT).
The market is also supported by the prospect of greater economic stimulus in the United States. President-elect Joe Biden, who takes office January 20, has pledged “trillions” of extra pandemic relief expenses.
However, oil price increases have been held back by demand concerns as coronavirus cases rise around the world.
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 Alex Lawler and Jessica Jaganathan; Editing by Kirsten Donovan, David Goodman and David Gregorio