Oil rises above $56 as tighter supply offsets coronavirus concern

Most OPEC+ producers will hold production steady in the face of new coronavirus-induced lockdowns.

Brent crude, against which Nigeria's oil is priced, was up 95 cents, or 1.7 per cent, at $56.61 per barrel as of 8:55pm Nigerian time on Tuesday after touching its highest since last February at $56.75. Brent rose in the previous four sessions.

U.S. West Texas Intermediate (WTI) was up 40 cents, or 0.8%, at $53.61 a barrel by 0128 GMT after gaining almost 2% on Tuesday. WTI rose to its highest in almost a year on Friday.

That said, a significant amount of oil traders still believe United States shale producers' reaction to the rally in the oil market might pose a short-term supply risk for oil, meaning it remains to be seen whether oil prices might be able to break higher in the coming weeks as the world's largest importer of oil, China grapples with its biggest COVID-19 spike in months. 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.

Mainland China saw its biggest daily increase in virus infections in more than five months, authorities said, as new infections rose in Hebei, which surrounds the capital, Beijing.

Shijiazhuang, the provincial capital and epicentre of the new outbreak, is in lockdown, with people and vehicles barred from leaving, as authorities seek to rein in the spread.

The Democrat-led sweep of the US Senate runoff elections and Saudi Arabia's recent announcement of unilateral production cuts have left commodity markets with a "tighter" medium-term outlook, analysts at the bank said in a note.

Still, the oil price losses were curbed by plans for U.S. President-elect Joe Biden to announce trillions of dollars in new coronavirus relief bills this week, much of which will be paid for by increased borrowing.

Brent and WTI rose nearly 8% last week, supported by Saudi Arabia's pledge for a voluntary oil output cut of 1 million barrels per day (bpd) in February and March as part of a deal for most OPEC+ producers to hold production steady.