Oil erases gains after hitting 13-month highs

LONDON (Reuters) – Oil hit 13-month highs on Tuesday, supported by supply cuts, a weaker dollar and optimism over a recovery in fuel demand, but retraced some of its recent gains in early U.S. trading.

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Brent crude futures for April were down 35 cents, or 0.5%, to $60.21 a barrel at 1443 GMT.

U.S. West Texas Intermediate crude (WTI) for March was at $57.43 a barrel, down 54 cents or 0.9%. Both contracts had hit their highest since January 2020 earlier on Tuesday after having risen for six straight sessions, prompting some profit taking.

The dollar was down 0.3% against a basket of currencies, making dollar-priced commodities more attractive to holders of other currencies.

Top exporter Saudi Arabia is curbing supply in February and March, on top of cuts by producers in the Organization of the Petroleum Exporting Countries and their allies, prompting forecasts of a supply deficit this year.

Also, Libya’s output has fallen to 1.04 million barrels per day (bpd) from 1.3 million bpd late last year due to an ongoing strike by Petroleum Facilities Guards, a Libyan oil source said on Monday.

Signalling no swift return of Iranian barrels into the market, Tehran and Washington appeared to be deadlocked over a resolution of sanctions on the OPEC member.

Investors are also pinning hopes on a recovery in demand when COVID-19 vaccines take effect and as governments and central banks deploy huge stimulus packages to shore up economic activity.

“Given the amount of liquidity in the system thanks to the U.S. Fed (Federal Reserve), all asset prices are inflated. We see prices reaching $80 per barrel next year,” said Amrita Sen, co-founder of the Energy Aspects think tank.

Investors are looking ahead to the U.S. weekly oil inventories data due later on Tuesday. [API/S]

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