Oil rises above $56 at 11-month high as tighter supply offsets coronavirus concern

Oil rose above $56 a barrel on Tuesday and stayed close to an 11-month high, as tighter supply and expectations of a drop in US inventories offset concerns over climbing coronavirus cases globally.

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Saudi Arabia has said it will cut output by an extra 1 million barrels per day (bpd) in February and March to stop inventories from building up. The latest US oil supply reports are expected to show crude stocks fell for a fifth straight week.

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Brent crude had climbed 58 cents, or 1 percent, to $56.24 a barrel by 0920 GMT, while US West Texas Intermediate (WTI) gained 42 cents, or 0.8 percent, to $52.67.

“I think the market will be rapid to conclude that yesterday’s modest pullback in price, provided the virus spread in China remains contained, was but a blip on the radar screen,” Stephen Innes, chief global market strategist at Axi, said in a report.

Read more: Saudi Arabia deepens cuts as OPEC+ agrees oil output rollover

US President-elect Joe Biden, who takes office on January 20 with his Democratic party in control of both houses of Congress, has promised “trillions” in extra pandemic-relief spending.

Oil also gained on the expectation of a further drop in US crude stockpiles. Analysts in a Reuters poll expect crude inventories to fall by 2.7 million barrels for a fifth straight week of declines.

The first of this week’s two supply reports, from industry group the American Petroleum Institute, is due at 2130 GMT.

Concerns about demand due to rising coronavirus cases worldwide limited gains.

Chinese authorities introduced new curbs in areas surrounding Beijing on Tuesday, putting 4.9 million residents under lockdown. Japan is to widen a state of emergency beyond Tokyo as virus case surge.