Oil rises on OPEC+ output cuts, U.S. inventory draw

Oil pumping jacks, also known as "nodding donkeys", are reflected in a puddle as they operate in an oilfield near Almetyevsk, Russia, on Sunday, Aug. 16, 2020.
Andrey Rudakov | Bloomberg via Getty Images

Oil rose on Thursday on strong U.S. economic data, falling inventories and the OPEC+ decision to stick to its output cuts, but a stronger U.S. dollar limited prices.

Brent crude gained 41 cents, or 0.7%, to $58.87 a barrel, having earlier hit its highest level since Feb. 21 at $59.04.

U.S. West Texas Intermediate (WTI) crude settled 0.6% higher at $56.02 a barrel.

"Fresh highs in Brent and gasoline again today keeping this bull market alive with OPEC+ output restraint still supportive item," said Jim Ritterbusch of Ritterbusch and Associates. "The oil bull market remains much intact."

U.S. Labor Department data, which showed a drop in Americans filing new applications for unemployment benefits last week, helped boost prices, while investors were also expecting positive data from the government's comprehensive monthly employment report due on Friday.

The market was further bolstered by news that Democrats in the U.S. Congress took the first steps toward advancing President Joe Biden's proposed $1.9 trillion coronavirus aid plan.

But a strong U.S. dollar, which typically moves inversely with oil prices, took some of the steam out of oil's momentum. The dollar hit a more than two-month high against a basket of other currencies.

On Wednesday, the Organization of the Petroleum Exporting Countries (OPEC) and allies - known as OPEC+ - extended its oil supply pact at existing levels, suggesting that producers are happy the cuts are draining inventories while uncertainty remains over the outlook for a recovery in demand as the COVID-19 pandemic lingers.

A document seen by Reuters on Tuesday showed that OPEC expects output cuts to keep the market in deficit throughout 2021, even though the group reduced its demand forecast.

Also on Wednesday, government data showed that U.S. crude oil stockpiles last week unexpectedly fell to 475.7 million barrels, their lowest level since March.

The number of Americans filing new applications for unemployment benefits decreased last week, suggesting that the jobs market was stabilising as authorities start to loosen pandemic-related restrictions on businesses.