Oil prices hit 11-month highs and were on track for a weekly gain on Friday, supported by Saudi Arabia‘s pledge to cut output and a global stocks rally as investors looked beyond rising coronavirus cases.
Brent crude climbed 88 cents, or 1.6%, to $55.26 a barrel by 1436 GMT, the highest since late February, and U.S. West Texas Intermediate (WTI) gained 79 cents, or 1.6%, to $51.62, also its highest level since late February.
Both were on track for weekly gains of more than 6%.
“The surprise Saudi cut is keeping bulls at the helm,” said Stephen Brennock of oil broker PVM. “It will take a brave man to bet against the current bullish run of play.”
Saudi Arabia this week pledged extra, voluntary oil output cuts of one million barrels per day (bpd) in February and March as part of a deal under which most OPEC+ producers will hold production steady in the face of new coronavirus lockdowns.
However, analysts said oil prices could see a correction in the coming months if their rallies were not backed by stronger fuel demand.
Severe mobility restrictions around the world to contain a surge in COVID-19 weighed on fuel sales, weakening the prospect of an energy demand recovery in the first half of 2021.
“Despite the widespread optimism, the market remains in a fragile state as COVID-19 continues to spread… As people sit at home and consume and commute less, oil demand will struggle to fully recover in the first quarter of 2021,” said Rystad Energy‘s senior Oil markets analyst Paola Rodriguez Masiu.
The pandemic claimed its highest U.S. death toll yet, killing more than 4,000 people in a single day, while China reported the biggest rise in daily cases in more than five months and Japan may extend a state of emergency beyond the greater Tokyo region.
A rally in global shares also lent some support to oil prices, with Japan’s Nikkei hitting a three-decade peak, as investors focused on hopes for an economic recovery later in the year.
In a sign of tighter supply following Saudi Arabia’s cut, seven North Sea crude cargoes were bought and sold in the trading window operated by Platts on Thursday. Normally, just one or two cargoes change hands each day.