Oil prices rose on Monday, with Brent futures nearing $60 a barrel, boosted by supply cuts among key producers and hopes for further U.S. economic stimulus measures to boost demand.
Brent crude for April touched a high of $59.95 a barrel and was at $59.91 by 0431 GMT, up 57 cents, or 1%. Front-month prices last hit $60 on Feb. 20, 2020.
U.S. West Texas Intermediate crude futures advanced 59 cents, or 1%, to $57.44 a barrel, the highest since January last year.
Saudi Arabia’s pledge of extra supply cuts in February and March on the back of reductions by other members of the Organization of the Petroleum Exporting Countries and its allies, including Russia, is helping to balance global markets and support prices.
In a sign that prompt supplies are tightening, the six-month Brent spread settled at $2.33 on Friday after hitting a high of $2.44, its widest in a year.
OCBC’s economist Howie Lee said world’s top exporter Saudi Arabia sent a “very bullish signal” last week when it kept monthly crude prices to Asia unchanged despite expectations of small cuts. [CRU/OSP]
“I don’t think anybody dares to short the market when Saudi is like this,” he added.
Investors, focused on oil demand recovery forecast by analysts to take place in the second half this year, are overlooking short-term weakness in demand right now caused by anti-coronavirus lockdowns across parts of Europe and Asia, Lee said.
A weaker dollar against most currencies on Monday also supported commodities, with dollar-denominated commodities becoming more affordable to holders of other currencies.
“A weak U.S. jobs report boosted hopes of further stimulus measures,” ANZ analysts said, adding that energy products and industrial metals benefited from an increased appetite for risk among investors.
Stronger crude prices are, meanwhile, encouraging U.S. producers to increase output.
The U.S. oil rig count, an early indicator of future output, rose to its highest since May last week, according to energy services firm Baker Hughes Co.