Oil rises as supply constraints retain focus amid U.S. Capitol drama

South Belridge Oil Field is the fourth-largest oil field in California and one of the most productive in the U.S.
David McNew | Getty Images

Oil prices rose on Thursday as Saudi Arabia, the world's biggest exporter, unilaterally agreed to cut output over the next two months and as U.S. crude stockpiles fell.

It was not immediately clear how the storming of the U.S. Capitol by supporters of President Donald Trump would impact oil markets, although some analysts believe President-elect Joe Biden's administration will clamp down on U.S. oil production.

Brent crude was up 22 cents, or 0.41%, at $54.52 per barrel, after gaining 1.3% overnight. U.S. West Texas Intermediate (WTI) gained 23 cents, or 0.45%, to trade at $50.86 per barrel. The contract rose 1.4% on Wednesday.

Saudi Arabia, the world's biggest oil exporter, said it would voluntarily cut 1 million barrels per day (bpd) of output in February and March, after OPEC+, which groups the Organization of the Petroleum Exporting Countries and other producers, including Russia, met earlier this week.

"WTI crude seems poised to rise higher as the Biden administration will clamp down on U.S. crude production, the Saudis tentatively alleviated oversupply concerns with their 1-million bpd cut present, and as the dollar's days seem numbered," said Edward Moya, senior market analyst at OANDA.

A lower dollar, which makes oil cheaper because the commodity is mostly traded using the greenback, is also supporting prices, analysts said.

U.S. crude stocks dropped and fuel inventories rose, the Energy Information Administration said on Wednesday.

Crude inventories were down by 8 million barrels in the week to Jan. 1 to 485.5 million barrels, against a Reuters poll showing analysts expected a 2.1 million-barrel decline.

The drop in crude stocks is a typical year-end occurrence as energy companies take oil out of storage to avoid tax bills.

A sustained rise in WTI prices, though, may result in a resurgence in U.S. output.

"If the U.S benchmark makes a sustained break above $50/bbl and beyond, it could encourage additional U.S. supply, which may be troublesome in the long run for many OPEC+ members," said Kevin Solomon, energy market analyst at StoneX.

Trump supporters swarmed the U.S. Capitol on Wednesday, sending it into lockdown, as Vice President Mike Pence refused a demand from the president to cancel his loss to President-elect Biden. Police have declared the situation secure and the certification of the election result has resumed.