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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 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 OPEC-led 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 week's two supply reports, from the American
Petroleum Institute, is due at 2130 GMT.
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)
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