LONDON: Oil prices extended gains on Wednesday, rising to their highest since late February, after Saudi Arabia announced a big voluntary production cut, and as an industry report showed US inventories fell last week.
Brent crude rose 25 cents, or 0.5pc, to $53.85 a barrel at 1321 GMT. Earlier in the session, it hit a high of $54.63 a barrel, a level not seen since Feb. 26, 2020.
US West Texas Intermediate (WTI) futures were up 7 cents, or 0.1pc, to $50 a barrel. The contract hit a session high of $50.59 a barrel, its highest since Feb. 25.
Both contracts were up about 5pc on Tuesday.
Saudi Arabia, the world’s biggest oil exporter, on Tuesday announced it would make additional, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March, after a meeting of OPEC+, which groups Organization of the Petroleum Exporting Countries producers and others, including Russia.
With coronavirus infections spreading rapidly producers are wary of a further hit to demand.
OPEC+ agreed most producers would hold output steady in February and March while allowing Russia and Kazakhstan to raise output by a modest 75,000 bpd in February and a further 75,000 bpd in March.
“Despite this bullish supply agreement, we believe Saudi’s decision likely reflects signs of weakening demand as lockdowns return,” Goldman Sachs analysts wrote in a note, though they maintained an end-2021 forecast for Brent of $65 a barrel.
US crude oil inventories fell 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.
Official US Energy Information Administration inventory data for the week to Jan.1 is due on Wednesday.