Oil prices hit their highest since late February on Thursday after a fall in U.S. stockpiles added further support following the unilateral decision by Saudi Arabia to cut output.
Brent crude was up 18 cents, or 0.3%, at $54.48 a barrel at 1015 GMT after earlier touching $54.90, levels not seen since before the the first COVID-19 lockdowns in the West.
U.S. West Texas Intermediate (WTI) rose as far as $51.28 and was last up 33 cents, or 0.7% at $50.96.
Wednesday’s storming of the U.S. Capitol by President Donald Trump’s supporters appeared to have little impact, while a slight rise in global equities suggested investors believed President-elect Joe Biden would be empowered to spend more freely.
Saudi Arabia, the world’s biggest oil exporter, said it would voluntarily cut 1 million barrels per day (bpd) of output in February and March, after OPEC+, which groups the Organization of the Petroleum Exporting Countries and other producers including Russia, met earlier this week.
“WTI crude seems poised to rise higher as the Biden administration will clamp down on U.S. crude production, the Saudis tentatively alleviated oversupply concerns with their 1-million bpd cut present”, said Edward Moya, senior market analyst at OANDA.
U.S. crude stocks dropped and fuel inventories rose, the Energy Information Administration said on Wednesday. [EIA/S]
Crude inventories were down by 8 million barrels in the week to Jan. 1 to 485.5 million barrels, against a Reuters poll showing analysts expected a 2.1 million-barrel decline.
The drop in crude stocks is a typical year-end occurrence as energy companies take oil out of storage to avoid tax bills.
UBS raised its forecast for Brent oil prices to $60 per barrel by mid-year, citing the Saudi output decision.
“The Kingdom’s preemptive move suggests to us a desire to defend prices and support the oil market amid demand concerns due to extended mobility restrictions in Europe,” UBS said.
“But if demand falls to a lesser extent, the Saudi move would also help to accelerate the process of reducing oil inventories.”