LONDON: Oil prices rose more than 2% on Tuesday, reaching its highest in nearly 12 months after major producers showed they were reining in output roughly in line with their commitments.

Brent crude was up $1.31, or 2.3%, at $57.66 a barrel by 1500 GMT for its third straight day of gains and the highest levels since February last year.

U.S. oil gained $1.33, or 2.5%, to its highest since early March at $54.88.

OPEC crude production rose for a seventh month in January but the increase was smaller than expected, a Reuters survey found.

Voluntary cuts of 1 million bpd by OPEC’s de facto leader, Saudi Arabia, are set to be implemented from the beginning of February through March.

“With OPEC and its allies (OPEC+) endeavouring to keep global oil production below demand, we expect petroleum inventories to keep falling,” UBS said in a note.

“With inventories starting to drop in 2H20, the structure of the futures curve has shifted to become downward-sloped. This is attracting investors.”

The investment bank forecast that Brent crude would reach $63 a barrel by the second half of this year and $65 by the first quarter of 2022. Goldman Sachs said it expected the benchmark to reach $65 by July.

Russian output increased in January but is in line with the supply pact, while in Kazakhstan oil volumes fell for the month.

However, energy giant BP flagged a difficult start to 2021 amid declining product demand, noting that January retail volumes were down about 20% year on year, compared with a decline of 11% in the fourth quarter.

Oil demand is nevertheless expected to recover in 2021, BP said, with global inventories seen returning to their five-year average by the middle of the year.

Helping to support prices, a severe blizzard in the north east of the United States is pushing up demand for heating fuel.—Reuters