Brent oil prices rose on Wednesday to the highest since February after Saudi Arabia said it will make bigger cuts in output than expected during a meeting with allied producers.
Brent crude rose as much as 0.6 per cent to $53.94 a barrel, the highest since February 26, 2020. It was at $53.79 a barrel and gained 4.9 per cent on Tuesday.
U.S. West Texas Intermediate (WTI) futures gained 13 cents, or 0.26 per cent, to $50.06 a barrel. The contract on Tuesday closed up 4.6 per cent at $49.93, its highest since Feb. 24, 2020.
Saudi Arabia, the world’s biggest oil exporter, agreed on Tuesday to make additional, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March, after a meeting with the Organization of Petroleum Exporting Countries, OPEC, and other major producers that form the group known as OPEC+.
The reductions agreed by Saudi Arabia were included in a deal to persuade other producers in the OPEC+ group to hold output steady.
With coronavirus infections spreading rapidly in many parts of the world producers are trying to support prices as demand takes a hit from new lockdowns being put in place.
“The decision came as a huge surprise as the organisation struggled yesterday to agree to a deal,” Capital Economics said in a note.
It “adds weight to our view that the oil market will be in a deficit which will help lift the price of Brent to $60 per barrel by end-year,” it said.
OPEC member Iran’s seizure of a South Korean tanker in the Gulf also supported prices on Wednesday.
Tehran denied it was holding the ship and its crew as hostages, a day after it seized the tanker while pushing for Seoul to release $7 billion of funds frozen under U.S. sanctions.