Oil prices rose on Monday buoyed by falling inventories and hopes of a swifter global economic recovery, although halting vaccine rollouts and renewed travel restrictions capped gains.
Brent crude was up 79 cents, or 1.4 percent, at $55.83 a barrel by 1215 GMT. US crude gained 61 cents, or 1.2 percent, to $52.81. Both benchmarks gained nearly 8 percent in January.
“Positive risk sentiment is one factor helping oil prices. The outlook of an ongoing decline in oil inventories over the coming weeks, as result of lower production from Saudi Arabia, is also helping crude,” UBS analyst Giovanni Staunovo said.
He said he expected Brent to hit $60 barrel by mid-year.
Goldman Sachs said prices could rise to $65 a barrel by July, forecasting an oil market deficit of 900,000 barrels per day (bpd) in the first half of 2021, a higher level than its previous prediction of 500,000 bpd.
OPEC oil output rose for a seventh month in January, a Reuters survey found, after the group and its allies agreed to ease supply curbs further, although the production growth was smaller than expected.
“OPEC is continuing to implement the agreed production cuts in a disciplined manner … which is one of the main reasons why oil prices are so stable,” said Commerzbank analyst Carsten Fritsch.
Russian oil and gas condensate production also increased in January, two sources told Reuters on Monday, but the increase was in line with expectations, following Moscow’s deal with OPEC on output cuts.
US oil and gas drillers are gearing up for a pick-up in demand. As higher prices make new wells profitable again, they added rigs for a sixth month in a row in January.
US production data from the Energy Information Administration showed output rose above 11 million bpd in November, the first time it has exceeded that figure since April.
Oil also found some support from the dollar’s weakness. Crude prices tend to move inversely to the US currency.