Oil prices hit highest levels in a year as producers cut output
Oil prices rose more than 2.5 per cent today to reach its highest since last February after major producers showed they were reining in output roughly in line with their commitments.
Brent crude was up 2.5 per cent at $57.77 a barrel for its third straight day of gains and the highest levels in 12 months.
West Texas Intermediate gained 3.0 per cent, to its highest since early March at $55.15.
Prices have steadily climbed back to last year’s levels after collapsing to historic lows last April due to the pandemic.
Opec crude production rose for a seventh month in January but the increase was smaller than expected, a Reuters survey found.
Voluntary cuts of 1m bpd by Opec’s de facto leader, Saudi Arabia, are set to be implemented from the beginning of February through March.
“With Opec and its allies (Opec+) endeavouring to keep global oil production below demand, we expect petroleum inventories to keep falling,” UBS said in a note.
“With inventories starting to drop in the scond half, the structure of the futures curve has shifted to become downward-sloped. This is attracting investors.”
The investment bank forecast that Brent crude would reach $63 a barrel by the second half of this year and $65 by the first quarter of 2022. Goldman Sachs said it expected the benchmark to reach $65 by July.
Russian output increased in January but is in line with the supply pact, while in Kazakhstan oil volumes fell for the month.
However, energy giant BP flagged a difficult start to 2021 amid declining product demand, noting that January retail volumes were down about 20 per cent year on year, compared with a decline of 11 per cent 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.
Helping to support prices, a severe blizzard in the north east of the United States is pushing up demand for heating fuel.