Oil jumped to the highest in more than a year, extending this week’s rally to above US$56 a barrel, with investors confident that OPEC+ producers are committed to restraining global supplies.

Futures in New York climbed nearly 1 per cent on Thursday, also buoyed by stronger U.S. equities. OPEC+ producers have pledged to keep draining a pandemic-driven oil surplus, while global inventories from China to the U.S. continue to decline. Saudi Arabia is keeping oil pricing unchanged for Asia, while raising prices for all grades for buyers in the U.S. and Europe.

“It looks like, at every turn, Saudi seems to want to support the market,” said Michael Hiley, head of over-the-counter energy trading at New York-based LPS Futures. “If demand really picks up, we could be short oil pretty quickly, because U.S. production isn’t going to come back fast.”

Key technical indicators suggest crude is due for a pullback, though. The 14-day Relative Strength Indexes for both Brent and West Texas Intermediate futures are showing the commodity in overbought territory. Meanwhile, a buying binge in the North Sea market seems to have subsided, with no bids or offers Thursday on an S&P Global Platts pricing window for the first time since late November.

The expectation for stronger oil demand is also supporting prices, with governments worldwide distributing COVID-19 vaccines. While a full-fledged recovery still has yet to take shape, oil consumption is poised to return to 2019 levels by the end of the year, according to Citigroup Inc.

“At the moment we are seeing pretty good oil prices,” Shell Chief Executive Officer Ben van Beurden said in a Bloomberg Television interview. “Demand is not back where it was a year ago, but then again we see a lot of discipline also from OPEC+ and therefore the market is being held in balance quite well.”

Prices

• West Texas Intermediate for March delivery rose 54 cents to settle at US$56.23 a barrel
• Brent for April settlement gained 38 cents to settle at US$58.84 a barrel, the highest since February 2020

Meanwhile, money is flooding back into the market. Total holdings of WTI crude futures are now at their highest level since July 2018, surpassing levels seen during the frenzied trading of April last year.

That influx of funds comes as the crude futures curve continues to indicate strength. The so-called Dec.-Red-Dec. spread, a favored trade of the world’s hedge funds, has topped US$3 a barrel this week to reach its strongest level in a year.

Other oil-market news:

• Big Oil has spent a year in survival mode -- taking an ax to spending and cutting dividends. But even after a rally in crude prices the industry is still living beyond its means.
• The oil-rich Canadian province that was hit hard by Joe Biden’s move to kill the Keystone XL pipeline is considering seeking compensation from the U.S. through an old free-trade rule that’s still in place.
• European air traffic was above the monthly forecast during the first three days of February, though numbers are expected to decline going forward, according to a report from Eurocontrol.