Oil prices up $1 on OPEC output cut talks, Iran tension

LONDON: Oil prices rose by around $1 on Tuesday as tension simmered following Iran's seizure of a South Korean vessel and as the OPEC+ group studied a possible production cut in February.

Brent crude futures for March rose 96 cents to $52.05 a barrel by 1206 GMT, while US West Texas Intermediate crude for February was at $48.53 a barrel, up 91 cents.

Both contracts fell more than 1% on Monday after the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, failed to agree on changes to February's oil output.

Saudi Arabia argued against pumping more because of new lockdowns that are likely to limit demand, while Russia led calls for higher production, citing recovering consumption.

An OPEC document dated Jan. 4, showed the group was studying a 500,000 barrel per day (bpd) cut for February, and other scenarios that include stable production or an increase of 500,000 bpd.

"It is no secret that the bullish kick which crude markets have received through much of the last quarter (crude rose almost 30% in Q4-2020) and again this morning is supported by a particularly hands-on approach from OPEC+ to tighten crude markets and bring inventories lower through 2021," JBC Energy said in a note.

OPEC+ is due to resume talks at 1430 GMT.

Tensions around OPEC member Iran's seizure of a South Korean vessel continued, as Iran said the Asian country owed it $7 billion.

For a Factbox on the importance of Gulf waters on oil shipping click.

More bearishly, given the implications for fuel demand, England began a new lockdown on Monday as its coronavirus cases surged.

"Near-term demand growth is stalling due to the resurgence of COVID-19 across North America, Europe and the Middle East and is likely set for deeper declines over the next several months," Fitch Solutions said, adding that Brent is expected to average $53 a barrel this year.