NEW YORK: Oil prices rose more than 2% on Tuesday, reaching their highest in 12 months after major producers showed they were reining in output roughly in line with their commitments.
The global and US crude benchmarks rallied as optimism about more US economic stimulus added to market bullishness from supply cuts.
Brent crude was up $1.14, or 2.0%, at $57.49 a barrel by 2:07 p.m. EST (1907 GMT) in its third straight day of gains. Earlier it touched $58.05, the highest levels since January last year.
US oil gained $1.19, or 2.2%, to $54.74, after hitting a session high of $55.26, the highest in a year.
The rally began as OPEC production increases were less than expected.
Crude output from the Organization of the Petroleum Exporting Countries rose for a seventh month in January but the increase was smaller than expected, a Reuters survey found.
Voluntary cuts of 1 million barrels per day by OPEC’s de facto leader, Saudi Arabia, are set to be implemented from the beginning of February through March.
Russian output increased in January but is in line with the OPEC+ supply pact, while in Kazakhstan oil volumes fell for the month.
The rally picked up steam as the US Congress looked ready to adopt an economic stimulus package, and as cold US weather boosted heating oil demand.
“You got the US economic stimulus package that no one thought we would get,” said Bob Yawger, director of energy futures at Mizuho in New York.
A cold snap and heavy snow in the US Northeast drove the margin for heating oil to an 8-month high of $15.88, lending further support to crude.
US distillate fuel stockpiles, including heating oil, were forecast to have dropped 400,000 barrels last week, according to a Reuters poll. Crude stockpiles were expected to rise by 400,000 barrels.
Inventory estimates from the American Petroleum Institute, a trade group, are expected at 4:30 p.m. Tuesday, and government figures follow on Wednesday.
However, energy giant BP flagged a difficult start to 2021 amid declining product demand, noting that January retail volumes were down about 20% year-on-year, compared with a decline of 11% in the fourth quarter.
Oil demand is nevertheless expected to recover in 2021, BP said, with global inventories seen returning to their five-year average by the middle of the year.
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