By Adedapo Adesanya
Crude prices rose by another 2 per cent on Tuesday, reaching their highest in 12 months after major producers showed they were cutting down output roughly in line with their commitments.
This raised the price of the Brent crude by $1.47 or 2.6 per cent to $57.82 per barrel and elevated the West Texas Intermediate (WTI) crude by $1.21 or 2.3 per cent to $54.76 per barrel.
The de-facto leader of the Organisation of the Petroleum Exporting Countries (OPEC), Saudi Arabia, is cutting at least one million barrels per day this month and the next.
The adherence to its promised production quotas has renewed optimism for the market as OPEC may be adding less supply to the market than expected.
While the group raised crude production as planned in January, the monthly change was barely two-thirds of the scheduled amount as increases by OPEC’s Persian Gulf exporters were offset by disruptions in Nigeria and Libya.
Also helping prices on Tuesday was the report of a massive draw in crude oil inventories of 4.261 million barrels for the week ending January 29 by the American Petroleum Institute (API) beating analysts’ expectations.
Analysts had predicted an inventory build of 446,000 barrels for the week.
In the previous week, the API reported a draw in oil inventories of 5.272-million barrels, after analysts had predicted a small build of 430,000 barrels.
If the official figures from the Energy Information Administration (EIA) due later on Wednesday supportS this, oil prices could receive more support.
Fresh support also came from the United States as Congress looked ready to adopt an economic stimulus package.
President Joe Biden began talks with Republicans over his $1.9 trillion stimulus package on Monday in his first big negotiating session with political rivals since becoming the US President, as he ramped up efforts to build momentum behind his COVID-19 relief bill.
Additionally, the cold US weather boosted heating oil demand.
Oil demand is nevertheless expected to recover in 2021, oil giant BP said, with global inventories seen returning to their five-year average by the middle of the year.
