Oil prices rise as investors look to higher demand seen in second half

Brent crude futures for March rose 72 cents to $55.47 a barrel by 1152 GMT after slipping 35 cents in the previous session.

Oil prices climbed on Tuesday as optimism that government stimulus will eventually lift global economic growth and oil demand trumped concerns that renewed Covid-19 pandemic lockdowns globally are cooling fuel consumption.

Oil prices have been supported this week by a pledge by Saudi Arabia, the world’s biggest oil exporter, to cut output by an additional 1 million barrels per day (bpd) in February and March. (Reuters/ File photo)

Brent crude futures for March rose 72 cents to $55.47 a barrel by 1152 GMT after slipping 35 cents in the previous session.

"The perception that any retracement will be quick as confidence in economic and oil demand recovery is unlikely to fade away," said PVM analysts in a note.

US West Texas Intermediate crude was at $52.65 a barrel, up 29 cents. There was no settlement on Monday as US markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.

Investors are upbeat about demand in China, the world's top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020.

China also avoided an economic contraction last year.

The International Energy Agency cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.

"Border closures, social distancing measures and shutdowns...will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year," it said in its monthly report.