Oil prices stable above $54

SARAJEVO, (Patria) - Oil prices stabilized on Thursday on international markets above the $54 level, supported by Saudi Arabia's announcement of further production cuts and an unexpectedly strong drop in US inventories.

In the London market, the price of a barrel was almost unchanged from the previous close and stood at $54.35. It briefly approached the $55 level, where it was before the pandemic.

In the US market, a barrel rose by 26 cents to $50.89, and briefly jumped to $51.28, SEEbiz reports.

Prices rose by more than $3 in both markets in the past two days, spurred by Saudi Arabia's announcement that it would unilaterally cut production by an additional million barrels per day in February and March to encourage other producers to continue limiting supply as before.

"The preventive Saudi move suggests a desire to defend prices and supports the oil market given concerns about demand fueled by extended restrictions in Europe," explain analysts from the Swiss bank UBS.

Other producers agreed at the meeting of the Organization of the Petroleum Exporting Countries (OPEC) and its allies that most of them would continue to limit supply as before, for a total of 7.2 million barrels per day.

According to OPEC data and statements by the Saudi minister, supply should decrease by 8.125 million barrels per day in February and by 8.05 million barrels per day in March, Reuters calculated.

The decision on the volume of production in April will be made at a meeting to be held in the first half of March.

The drop in US crude oil inventories last week by eight million barrels, according to official data, also supported prices. Analysts expected a much more modest drop of 2.1 million barrels.

A drop in crude oil inventories at the end of the year is generally a common occurrence, as oil companies remove oil from tanks to reduce tax liabilities, Reuters explains.

The price increase was hampered by the unrest in Washington and the attempt by demonstrators to disrupt the formal confirmation of Joe Biden's victory in the presidential elections by storming Congress.

Police pushed demonstrators out of Congress, during which one woman was killed and three other people died due to the worsening of their health condition. According to the police, at least 52 people were arrested, mostly for violating the curfew and possession of weapons.

Vice President Mike Pence rejected President Donald Trump's request to challenge the election results, and Republican majority leader Mitch McConnell dismissed the attempt to challenge them in the Senate.

The unrest in the United States of America (USA) does not seem to have significantly affected oil prices, and a slight rise in stocks on world markets signals investors' confidence that the newly elected US president, after Democrats won a majority in the Senate, will have a free hand in spending.

Separately, OPEC reported on its website that the price of a barrel of its member countries' reference oil basket was $53.29 on Wednesday, which means it jumped by $2.54 compared to Tuesday.