London — Oil prices hit 11-month highs on Friday and were on track for a strong weekly gain, supported by Saudi Arabia’s pledge to cut output and a rally in global equities as investors looked beyond rising coronavirus cases.
Brent crude climbed 44c, or 0.8%, to $54.82 a barrel by 10.07am GMT, the highest since late February, and US West Texas Intermediate (WTI) gained 36c, or 0.7%, to $51.19, also its highest level since late February.
Both benchmarks were on track for weekly gains of about 6%.
“The surprise Saudi cut is keeping bulls at the helm of the energy complex,” said Stephen Brennock of oil broker PVM. “It will take a brave man to bet against the current bullish run of play.”
Earlier this week, Saudi Arabia pledged additional, voluntary oil output cuts of 1-million barrels per day (bpd) in February and March as part of a deal under which most oil cartel Opec and its allied producers (Opec+) 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 cases still weighed on fuel sales, weakening the prospect of energy demand recovery in the first half of 2021.
“Oil markets are expected to stay in a bullish tone towards February,” said Kazuhiko Saito, chief analyst at commodities broker Fujitomi. “But concerns over slower demand in petrol and other fuels in the US and other parts of the world due to wider restrictions to contain the spreading Covid-19 pandemic may limit gains.”
The pandemic claimed its highest US 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 looked beyond rising coronavirus cases and focused on hopes for an economic recovery later in the year.