On Wednesday oil prices rose to their highest since February 2020 after Saudi Arabia agreed to reduce output more than expected in a meeting with allied producers, while industry figures showed U.S. stockpiles were down last week. Brent crude rose as much as 0.9% to $54.09 a barrel, the highest in the past year. It was at $53.82 a barrel at 0757 GMT after jumping 4.9% on Tuesday.
U.S. West Texas Intermediate (WTI) futures climbed as much as 0.6% to $50.24 a barrel, also the highest since Feb. 26, before slipping to $49.96. On Tuesday, the contract closed up 4.6%.
Saudi Arabia, the world’s biggest oil exporter, agreed on Tuesday to make additional, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March, after a meeting with the Organization of the Petroleum Exporting Countries (OPEC) and other major producers that form the group known as OPEC+. The reductions agreed by Saudi Arabia were included in a deal to persuade other producers in the OPEC+ group to hold output steady.
With coronavirus infections spreading quickly in many parts of the world producers are trying to support prices as demand endures a hit from new lockdowns being put in place. Analysts from Goldman Sachs said, “Despite this bullish supply agreement, we believe Saudi’s decision likely reflects signs of weakening demand as lockdowns return.”
OPEC member Iran’s seizure of a South Korean tanker in the Gulf on Monday also continued to support prices. Tehran denied it was holding the ship and its crew hostage after seizing the tanker while pushing for Seoul to release $7 billion of funds frozen under U.S. sanctions. In the meantime, U.S. crude oil inventories dropped by 1.7 million barrels in the week to Jan. 1 to 491.3 million barrels, data from industry group the American Petroleum Institute showed late on Tuesday.