Oil rises above $56 as tighter supply offsets coronavirus concern

Oil rises to highest since Feb, set for weekly gain on Saudi output cut

Brent and WTI rose nearly 8% last week, supported by Saudi Arabia's pledge for a voluntary oil output cut of 1 million barrels per day (bpd) in February and March as part of a deal for most OPEC+ producers to hold production steady.

Oil hit an 11-month high just below $57 a barrel on Tuesday, bolstered by Saudi Arabia's plans to limit supply, offsetting worries that rising coronavirus cases globally would curtail fuel demand.

Brent crude oil futures were down 78 cents, or 1.4 per cent, at $55.21 a barrel, after falling $1 to a session low of $54.99 earlier. U.S. West Texas Intermediate (WTI) gained 96 cents, or 1.8%, to $53.28.

Saudi Arabia plans to cut output by an extra one million barrels per day in February and March to keep inventories in check.

A preliminary Reuters poll has highlighted a fall in United States crude oil stockpiles for a fifth straight week, while refined products inventories increased last week.

The first of this week's two supply reports, from industry group the American Petroleum Institute, is due at 2130 GMT.

As per the latest API Weekly Crude Oil Stock data for the week ended on January 08, the stockpile dropped 5.821 million barrels versus -1.663 million barrels.

A stronger dollar, supported by hopes for more stimulus to boost the world's largest economy, also weighed on oil prices. The median estimate in a Bloomberg survey forecast the Energy Information Administration will report nationwide crude inventories dropped by 3 million barrels.

Many producers will be able to boost output and USA shale will be needed to fill the gap in the oil balance in the short term, IEA Director Fatih Birol said during a Bloomberg television interview.

Yet again, reports of an unexpected decline in US crude stockpiles seemed to contradict analytical worries that demand recovery has stalled due to rising coronavirus infection rates, and as a result oil prices on Tuesday rose to an 11 month high.

Mainland China saw its biggest daily increase in virus infections in more than five months, authorities said on Monday, as new infections rose in Hebei, which surrounds the capital, Beijing.



Other news