Oil hit an 11month high towards 57 a barrel on Tuesday as tighter supply and expectations of a drop in U.S. inventories offset concerns over climbing 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. EIAS
Brent crude was 75 cents, or 1.4, higher at 56.41 a barrel by 1022 GMT and earlier hit 56.75, the highest since last February. U.S. West Texas Intermediate WTI gained 86 cents, or 1.7, to 53.11.
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 OPECled deal in which most producers will hold output steady in February. Record cuts by OPEC and its allies in 2020 helped oil 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 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 first of this weeks two supply reports, from the American Petroleum Institute, is due at 2130 GMT.
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