CORRECTED-UPDATE 4-Oil prices extend rally as producers restrain output

(Corrects to read 2% (not 1%), paragraph 1)

* OPEC output increase smaller than expected – poll

* UBS sees Brent at $63 mid-year, Goldman at $65

* BP cites declining product demand, retail sales

* U.S. blizzard offers hope for product demand

By Noah Browning

LONDON, Feb 2 (Reuters) – Oil prices rose more than 2% on Tuesday after major crude producers showed they were reining in output roughly in line with their commitments, extending gains in a market thrown out of kilter by weak demand during the coronavirus pandemic.

Brent crude was up $1.30, or 2.3%, at $57.65 a barrel by 1150 GMT, its third straight day of gains. U.S. oil gained $1.25, also 2.3%, to $54.80. Both contracts rose more than 2% in the previous session.

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 though 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 Brent would reach $63 a barrel by the second half of this year and $65 by the first quarter of 2022. Goldman Sacks said it expected the benchmark to reach $65 a barrel by July. output increased in January but in line with the agreement on reducing production, while in Kazakhstan oil volume fell for the month. energy giant BP flagged a difficult start to 2021 amid declining product demand, noting that January retail volumes were down by around 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 expected to return to their five-year average by the middle of the year. to support prices, a severe blizzard hitting a large area of the northeastern United States is pushing up demand for heating fuel. CHART: U.S. oil may rise into $54.60-$55.10 range

CHART: Brent oil may rise into $57.52-$58.01 range

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