Oil prices hit their highest level in nearly a year and were on track for a weekly gain on Friday, supported by Saudi Arabia's pledge to cut output and strong gains in major equity markets.
Brent crude climbed 94 cents, or 1.8%, to $55.35 a barrel, and West Texas Intermediate crude futures (WTI) settled $1.41, or 2.8%, higher at $52.24 per barrel, also its highest since late February. Both benchmarks were on track for weekly gains of more than 6%.
"People are realizing the market is tighter than it has been in a while and that the commitment by Saudi Arabia to cut back production is going to keep the market balanced despite the concerns about shut-ins from COVID," said Phil Flynn, senior analyst at Price Futures Group in Chicago.
Saudi Arabia this week pledged extra, voluntary oil output cuts of 1 million barrels per day (bpd) in February and March as part of a deal under which most OPEC+ producers will hold production steady during new lockdowns.
Analysts said oil prices could see a correction in the coming months if fuel demand remains constrained by the pandemic. Strict restrictions on travel and other activity around the world to contain a surge in COVID-19 cases are weighing on fuel sales, weakening the prospect of an energy demand recovery in the first half of 2021.
The pandemic claimed its highest U.S. death toll yet this week, killing more than 4,000 people in a single day, while China reported the biggest rise in daily cases in more than five months and Japan may extend a state of emergency beyond the greater Tokyo region.
A global equities rally pushed Japan's Nikkei and U.S. stock benchmarks to new records, as investors focused on further stimulus to mend the economic damage of the pandemic.
The U.S. Congress may soon approve more pandemic relief, a scenario that became more likely after two Georgia Democrats won Senate seats that handed Democrats control of both houses of Congress once Biden is sworn in.
"The energy complex (is) placing particular focus on the democratic victories in the Georgia elections that, in turn, boost the likelihood of larger stimulus measures," said Jim Ritterbusch of Ritterbusch and Associates.