Oil hits 11-month high just below $57 as Saudi cut supports
Oil hit an 11-month high just below $57 a barrel as tighter supply and expectations of 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 stop inventories from building up. The latest U.S. supply reports are expected to show crude stocks fell for a fifth straight week. [EIA/S]
Brent crude was 79 cents, or 1.4%, higher at $56.45 a barrel by 1304 GMT and earlier hit $56.75, the highest since last February. U.S. West Texas Intermediate (WTI) gained 89 cents, or 1.7%, to $53.14.
“Saudi Arabia in particular is ensuring through its additional voluntary production cuts that the market is undersupplied if anything,” said Eugen Weinberg of Commerzbank.
“We advise investors with a high risk tolerance to be long Brent or to sell its downside price risks,” said Giovanni Staunovo of UBS in a report on Tuesday.
Oil also gained on the expectation of 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 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.
Concerns about demand due to rising coronavirus cases worldwide limited gains.
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 Susan Fenton
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