By Abba Gwale
As a result of rising cases of COVID-19 in the world and tighter supply and expectations of a drop in America, oil hit 11-month high up to $57 par barrel on Tuesday.
For five consecutive weeks, crude market fell in the latest America supply report and Saudi Arabia plans to cut its exportations of oil by an extra one million barrel per day.
Brent crude was 75 cents, or 1.4%, higher at $56.41 a barrel by 1022 GMT and earlier hit $56.75, the highest since last February. U.S. West Texas Intermediate (WTI) gained 86 cents, or 1.7%, to $53.11.
Eugen Weinberg of Commerz bank said “Saudi Arabia in particular is ensuring through its additional voluntary production cuts that the market is undersupplied if anything.”
The Saudi decision cut is part of an OPEC-led deal in which most oil producers will hold production steady in February. Record cuts by OPEC and its allies in 2020 helped oil recover from historic lows in April. Some analysts see further gains are likely in due time.
In a report on Tuesday, Giobanni Staunovo of UBS said they advise investors with a high risk tolerance to be long Brent or to sell its downside price risks.
As a result of a drop in U.S. crude stockpiles, there’s expectations that crude inventories to fall by 2.7 million barrels for a fifth straight week since its first declining while during the two weeks supply report, is due in 2130 GMT.