Oil prices rise as output cuts increase by major oil producers. Credit: David Mark / Pixabay.

Crude oil prices climbed following the decision by major oil producers to slash output and optimism over spike in fuel demand support boosted markets recovery.

Brent crude futures for April increased $0.48, or 0.8%, to reach $61.04 a barrel, while US West Texas Intermediate (WTI) for March rose by $0.45, or 0.8% to $58.42 a barrel, reported Reuters.

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Output cuts by producers in the Organization of the Petroleum Exporting Countries (OPEC) and their allies, together with Saudi Arabia’s supply reductions in February and March, are balancing global markets while tightening supplies.

Investors are anticipating recovery of the oil demand once Covid-19 vaccines take effect, while the weak dollar has helped in increasing commodities’ prices.

Brokerage Axi chief global markets strategist Stephen Innes was reported by the news agency as saying: “Progress on US stimulus and optimism around the roll-out and effect of vaccines across the remainder of 2021 and a slightly weaker USD help the view (for a recovery) albeit there was mixed news on the impact of the current vaccines formulated on the emerging South African variant.”

However, Innes cautioned that on technical charts both Brent and WTI are in overbought territory.

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He added: “While I remain a bit cautious at current levels, the medium and longer-term outlook for demand is healthy, and one can understand a willingness to look through some of the near-term uncertainty that remains for oil.”

According to a preliminary poll by Reuters, US crude and gasoline stockpiles increased last week, while distillate stocks were reduced.