LONDON (Reuters) – Oil prices climbed back above $59 a barrel on Wednesday as a blast of cold weather boosts heating oil demand in the United States and OPEC supply cuts quicken the seasonal fall in crude stocks in industrialized countries.
U.S. crude oil gained 32 cents to $59.20 a barrel by 1137 GMT, adding to a 14-cent rise on Tuesday. London Brent crude was up 37 cents at $58.79.
Oil has recovered from a steep slide that took it to a 20-month low of $49.80 on January 18.
The rally has coincided with a drop in temperatures in top heating oil market the U.S. Northeast, OPEC supply cuts and renewed investor interest in energy.
The U.S. Energy Information Administration (EIA) said on Tuesday that, due to OPEC output cuts, commercial oil stocks in industrialized countries would fall 900,000 barrels per day in the first quarter — three times faster than average for the time of year.
Even though OPEC was unlikely to curb supplies as much as it has agreed, the cuts could prevent the typical rise in oil inventories during the second quarter.
That may pave the way for OPEC to raise output again by around a million bpd by the fourth quarter to meet an expected rise in global demand, the EIA said.
Oil prices are now rising toward the $60 level that often prompts consumers to call for additional supplies, but OPEC is pushing ahead with a 500,000 bpd cut that came into effect from February 1. That follows a 1.2 million bpd cut from November 1 last year.
A senior official with Nigeria’s state oil company said the world’s eighth-largest crude exporter will cut as much as 300,000 bpd of crude output in the next two months to meet its OPEC obligations.
U.S. distillate stock, which include heating oil, were expected to fall 3.2 million barrels in government data due out later on Wednesday, a Reuters poll of analysts showed.
“Stock levels will continue to fall until the end of February as a cold spell hits the United States,” said Koo Ja-kyum, chief analyst at Korea National Oil Corp (KNOC).
The weekly data was also expected to show gasoline stocks in the world’s number one consumer rose 1.8 million barrels, while crude stocks rose 1.4 million barrels.