Oil prices advanced on Tuesday to their highest in 13 months, as supply cuts by major producers and optimism over a recovery in fuel demand support energy markets.
Brent crude futures for April gained 50 cents, or 0.8%, to $61.06 a barrel by 0721 GMT. U.S. West Texas Intermediate crude (WTI) for March was at $58.37 a barrel, up 40 cents, or 0.7%.
Both Brent and WTI touched their highest since January 2020 earlier in the session. Front-month prices for both contracts were up for the seventh session on Tuesday, the longest winning streak since January 2019.
“Oil’s upward momentum remained undiminished on global recovery hopes,” said OANDA’s Jeffrey Halley.
Additional supply reductions by top exporter Saudi Arabia in February and March, on top of cuts by producers in the Organization of the Petroleum Exporting Countries and their allies, are tightening supplies and balancing global markets.
Investors are also pinning hopes on oil demand recovery when COVID-19 vaccines take effect, while a weak dollar has helped shored up the prices of commodities.
However, analysts cautioned that the fast run-up in oil prices has driven both crude futures contracts into overbought territory.
“That Brent crude and WTI have now run so far ahead of their respective support region in such a short amount of time is a warning sign,” OANDA’s Halley said.
“When it comes, the correction could well be quite brutal, unless oil now contents itself to consolidate at these price levels for the next few days.”
Stephen Innes, chief global markets strategist at brokerage Axi, said, “While I remain a bit cautious at current levels, the medium and longer-term outlook for demand is healthy, and one can understand a willingness to look through some of the near-term uncertainty that remains for oil.”
Investors are looking ahead to the U.S. weekly oil inventories data due later in the week.
U.S. crude and gasoline stockpiles probably rose last week, while distillate stocks were seen down, a preliminary Reuters poll showed on Monday.