Oil prices hit their highest level in nearly a year on Friday, gaining 8% on the week, supported by Saudi Arabia's pledge to cut output and strong gains in major equity markets.
Brent crude settled at $55.99 a barrel, climbing $1.61, or 3%, on the day and 8.1% on the week. West Texas Intermediate crude futures (WTI) closed at $52.24 a barrel, gaining $1.41, or 2.8%, also its highest since late February. WTI posted a weekly gain of 7.7%.
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.
The kingdom, the de facto leader of the Organization of the Petroleum Exporting Countries, was at odds with some other producers that wanted to boost output to head off US shale companies from capturing more market share. Eventually, an agreement was reached to allow Russia and others to boost output while the Saudis restrict theirs.
"This week the Saudis stepped up to try to take over the market and took ownership of getting prices stabilized," said John Kilduff, partner at Again Capital LLC in New York. "It seems like they're on a mission again to get prices back up."
The number of US oil rigs rose for the seventh straight week, gaining eight to 275 this week to its highest since May, according to energy services firm Baker Hughes Co.
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 US death toll yet this week, killing more than 4,000 people in a single day, while China reported its biggest rise in daily cases in more than five months, while Japan may extend a state of emergency beyond the greater Tokyo region.
A global equities rally pushed Japan's Nikkei and US stock benchmarks to new records, as investors focused on further stimulus to mend the economic damage of the pandemic.
The US 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.