Oil prices rose on Monday to their highest in just over a year, with Brent futures nudging past $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 an intraday high of $60.06 a barrel, the highest since January last year. The front-month contract was at $59.90 by 0728 GMT, up 56 cents, or 0.9%.
U.S. West Texas Intermediate crude futures for March advanced 60 cents, or 1.1%, to $57.45 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 hit a high of $2.45 on Monday, its widest since January last year.
OCBC’s economist Howie Lee said the 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.
“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 last week to its highest since May, according to energy services firm Baker Hughes Co.