NEW YORK, Jan 14: Prices of fuel oil increased to near one-year highs as vaccines, stimulus and Saudi Arabian production cuts lifted the energy outlook, report agencies.
Brent and WTI crude oil prices rose as investors bet stimulus and vaccines would fuel an economic recovery. Saudi Arabia's oil output cuts also lifted sentiment, while data showed a bigger-than-expected drop in US inventories.
Analysts said 2021 is set to see a solid recovery in oil prices, as businesses reopen and global trade and travel resume. Oil prices rose on Wednesday to close to 1-year highs, as data hinted at stronger demand, while more stimulus and production cuts brightened the outlook.
Brent crude - the international benchmark price - climbed 0.1 per cent to $56.65 a barrel, having earlier risen above $57, its highest level since February. US WTI crude rose 0.28 per cent hit trade at around its highest levels since February, at $53.38.
Both prices have climbed sharply in 2021 already, with Brent crude and WTI each around 10 per cent higher. It is a remarkable turnaround for oil prices, after demand tanked during the first wave of coronavirus lockdowns, causing the WTI price to fall into negative territory for the first time in the spring of 2020.
The market is now looking past the recent surge in COVID-19 cases across Europe and the US to the middle of next year. The hope is that, by then, vaccines will have allowed some form of normal life to resume, boosting demand for energy.
Saudi Arabia's pledge to cut output by 1.0 million barrels per day in February and March has also put a floor under oil prices.
The Gulf state has already cut supplies of crude oil for February for some Asian buyers, according to refinery and trade sources who spoke to Reuters.
Meanwhile, data from the American Petroleum Institute on Tuesday suggested that demand was buoyant. Oil stocks dropped by 5.8 million barrels last week, according to API. Analysts had expected a fall of 2.3 million barrels, according to a Reuters poll.
"Crude oil has been on a tear," said Marios Hadjikyriacos, investment analyst at trading platform XM. "It seems that the promises of a US spending extravaganza and Saudi Arabia slashing its crude production in the coming months have more than offset European demand fears, propelling crude above its pre-pandemic levels," the analyst said.
Official oil inventory figures from the US Energy Information Administration are due later. They are expected to show a drawdown of around between two and four million barrels after an eight million barrel drop last week.
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