Both benchmarks’ backwardation, where contracts for near-term delivery are more expensive than later supplies, hit their highest in just over a year at around $2.30, indicating expectations of tighter supply. U.S. crude oil stockpiles fell last week to 475.7 million barrels, the Energy Information Administration said on Wednesday, their lowest since March. Refiner utilization rates, meanwhile, rose by 0.6 percentage points. “Refineries are back in business, which is supportive for crude,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “On net, this is a supportive report.”

The market has been bolstered by deep supply cuts from the Organization of the Petroleum Exporting Countries and allies, which on Wednesday, maintained their oil output policy. The day before, a document seen by Reuters showed that OPEC+ expects the oil market to be in deficit throughout 2021, peaking at 2 million barrels per day in May. “Underpinning the bullish sentiment are tightening fundamentals. Ahead of today’s ministerial meeting, OPEC+ hinted that global oil stockpiles will decline below the five-year average by June,” PVM analysts said.

The market was also bolstered by news that Democrats in the U.S. Congress took the first steps toward advancing President Joe Biden’s proposed $1.9 trillion coronavirus aid plan without Republican support.

U.S. government data last week showed a 2.3 million-barrel draw down in stocks at the Cushing, Oklahoma, delivery hub for crude futures. Another 2.3 million-barrel weekly decline is expected since then, analysts and traders said citing a Wood Mackenzie report. “Crude is being supported by many small factors this week – expected draw downs in Cushing, a sudden rise in winter fuel demand amid colder weather, and further talks on Capitol Hill about stimulus checks,” said John Kilduff, partner at Again Capital LLC in New York.

The U.S. Northeast has been hit by a powerful winter snow storm, pummeling a vast swath stretching from Pennsylvania through New England, causing widespread disruption in New York City and other major urban centers in the region. Goldman Sachs said prices could rise to $65 by July, forecasting an oil market deficit of 900,000 barrels per day (bpd) in the first half of 2021, a higher level than its previous prediction of 500,000 bpd.

OPEC oil output rose for a seventh month in January, a Reuters survey found, after the group and its allies agreed to ease supply curbs further, although the production growth was smaller than expected. Russian oil and gas condensate production also increased in January, two sources told Reuters on Monday, but the increase was in line with expectations, following Moscow’s deal with OPEC on output cuts.

U.S. oil and gas drillers are gearing up for a pick-up in demand. As higher prices make new wells profitable again, they added rigs for a sixth month in a row in January.

U.S. production data from the Energy Information Administration showed output rose above 11 million bpd in November, the first time it has exceeded that figure since April.

Baker Hughes reported on Friday that the number of oil and gas rigs in the United States rose by 6 to 384. The oil and gas rig count has risen for ten weeks in a row for a total gain of 74. The oil rig count increased by 6 this week, while the number of gas rigs remained unchanged. The number of miscellaneous rigs also remained unchanged. Total oil and gas rigs in the United States are now 406 less than this time last year.

The EIA’s estimate for oil production in the United States fell for the first time in six weeks for the ending January 22, to 10.9 million barrels – still 2.0 million bpd off the all-time high reached last March.

Canada’s overall rig count increased this week as well, by 2. Oil and gas rigs in Canada are now at 174 active rigs and down 73 year on year. The Permian basin saw an increase in the number of rigs by 4 this week, bringing the total active rigs in the Permian to 192, or 214 below this time last year.

WTI and Brent were both trading up on Friday on significant inventory decreases this week, combined with a weaker U.S. dollar.

Brent Crude for March delivery fell 27 cents, or 0.48%, to $55.54 per barrel. WTI Crude settled 51 cents, or 0.96%, lower at $52.34 per barrel. The premium of the Brent front-month over the second month rose to its highest level since February 2020 for a fourth day in a row. The U.S. 3-2-1 crack spread , a measure of the profit margin for refining crude into gasoline and distillate, was on track for its highest close since May 2020, while the gasoline crack spread was on track for its highest close since June 2020.

Oil prices were supported earlier by Wednesday’s data that showed a huge 10 million-barrel drawdown in U.S. crude inventories last week, which analysts said was because of a pickup in U.S. crude exports and a drop in imports. “The draw was a big relief for inventories, especially as it followed a week of builds, putting traders at ease that supply doesn’t overwhelm demand for the time being,” Rystad Energy’s Louise Dickson said.

In addition, the U.S. dollar index flipped into negative territory after earlier gains, which also helped support oil prices. Buyers using other currencies pay less for dollar-priced oil when the greenback falls. Demand concerns, however, weighed on sentiment and prevented oil prices from holding those earlier gains.

The U.S. economy contracted at its deepest pace since World War Two in 2020 as the COVID-19 pandemic depressed consumer spending and business investment, pushing millions of Americans out of work and into poverty. A separate report showed 847,000 more people likely filed U.S. jobless claims last week, strengthening views of persistent labor market weakness. Stricter vaccine checks by the European Union and delivery hold-ups from AstraZeneca Plc and Pfizer Inc have slowed the roll out of shots. In China, the world’s second-largest oil consumer, a surge in coronavirus cases has led to travel restrictions ahead of the Lunar New Year, normally the busiest travel season of the year.

Brent Crude gained 34 cents to $56.25 a barrel. WTI Crude settled 24 cents, or 0.5%, higher at $52.85 per barrel. “The market was led up by a significant draw in crude oil,” said Andrew Lipow, president Lipow Oil Associates in Houston. Oil prices have recovered from record lows in April due to rising demand from the early months of the pandemic, particularly in China, and huge supply cuts by the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+. “Oil continues consolidating,” said Jeffrey Halley of brokerage OANDA. “The Saudi Arabian cuts, OPEC+ compliance above 85% and an insatiable demand from Asia means that oil has seen its cyclical lows for 2021.”

The number of global coronavirus cases has surpassed 100 million as infections rise in Europe and the Americas, while Asia scrambles to contain fresh outbreaks, weighing on oil demand and prices. China, the second-largest oil consumer, has recently seen a coronavirus resurgence, but official Chinese data showed 75 new confirmed cases of COVID-19 on Wednesday, the lowest daily rise since Jan. 11.

After the U.S. oil inventory report, the market’s focus shifts to the results of the U.S. Federal Reserve’s two-day policy meeting. Analysts expect the Fed to stick to its dovish tone to help speed the economic recovery.

“Oil demand is definitely under pressure currently and will be for a while until lockdowns are lifted and COVID-19 infection speed slows down” China is reporting rising COVID-19 cases, casting a pall over demand prospects in the world’s largest energy consumer. Elsewhere, Indian crude oil imports in December rose to their highest in more than two years. Dampening bullish sentiment, U.S. Democrats are still trying to convince Republican lawmakers of the need for more stimulus, raising questions over when and in what form a package will be approved. Raising the prospect of higher oil demand later in the year, the International Monetary Fund predicted global growth of 5.5% in 2021, an increase of 0.3 percentage points from the October forecast, citing expectations of a vaccine-powered uptick.

On the supply side, the Organization of the Petroleum Exporting Countries and its allies’ compliance with pledged oil output curbs is averaging 85% in January, tanker tracker Petro-Logistics said on Monday, suggesting the group has improved compliance with supply curb commitments. Also, output from the giant Tengiz field in Kazakhstan, disrupted by a power cut on Jan. 17, will be restored over the next few days, according to Tengizchevroil. “It appears that market players are cautiously sanguine about the producer group’s market management strategy and therefore about the imminent depletion in global oil inventories,” PVM analysts said.

Officials in U.S. President Joe Biden’s administration on a Sunday call with Republican and Democratic lawmakers tried to head off Republican concerns that his $1.9 trillion pandemic relief proposal was too expensive. “In the U.S., newly inaugurated President Biden seems to be pushing for a quick approval of his proposed $1.9 trillion pandemic relief package, a development interpreted by the market as a clear indication that the new U.S. administration aims to kick-start an economic recovery, which will naturally benefit fuel consumption,” said Bjornar Tonhaugen, Rystad Energy’s head of oil markets.

The Organization of the Petroleum Exporting Countries and its allies’ compliance with pledged oil output curbs is averaging 85% so far in January, tanker tracker Petro-Logistics said on Monday, suggesting the group had improved its adherence to pledged supply curbs. Other supply concerns have offered some support. Indonesia said its coast guard seized an Iranian-flagged tanker over suspected illegal fuel transfers, raising the prospect of more tensions in the oil-exporting Gulf. Output from Kazakhstan’s giant Tengiz field was disrupted by a power outage on Jan. 17.

Meanwhile, European nations have imposed tough restrictions to halt the spread of the virus, while China reported a rise in new COVID-19 cases, casting a pall over demand prospects in the world’s largest energy consumer.

Barclays raised its 2021 oil price forecasts, but said rising cases in China could contribute to near-term pullbacks.

Recovering fuel demand in China underpinned market gains late last year while the United States and Europe lagged, but that source of support is fading as a fresh wave of COVID-19 cases has sparked new restrictions. Travel on U.S. roads fell 11% in November, a steeper decline over October road use as coronavirus cases increased, the U.S. Transportation Department said Friday. “The pandemic seems to continue to expand into a second wave in China, with infections rising by the day and reaching again different regions such as Shanghai,” said Rystad Energy oil markets analyst Louise Dickson.

U.S. crude inventory data showed signs of strength in domestic product demand. While U.S. crude oil stockpiles rose unexpectedly last week, refineries hiked output to their highest capacity usage since March and demand for gasoline and diesel increased week on week. “Crude oil exports did fall quite dramatically, which is the main reason for a decent build overall in crude stocks,” said Tony Headrick, energy market analyst at CHS Hedging.