Oil prices rose on Wednesday to their highest since February 2020 after Saudi Arabia agreed to reduce output more than expected in a meeting with allied producers, while industry figures showed United States crude stockpiles were down last week.

Brent crude rose as much as nearly one per cent to $54.09 a barrel, the highest since Feb 26, 2020. It was at $53.87 a barrel at 0536 GMT after jumping 4.9pc on Tuesday.

US West Texas Intermediate (WTI) futures reached $50.24 a barrel, also the highest since Feb 26, before slipping to $50. The contract on Tuesday closed up 4.6pc.

Saudi Arabia, the world’s biggest oil exporter, agreed on Tuesday to make additional, voluntary oil output cuts of one million barrels per day (bpd) in February and March, after a meeting with the Organisation of the Petroleum Exporting Countries (Opec) and other major producers that form the group known as Opec+.

The reductions agreed by Saudi Arabia were included in a deal to persuade other producers in the Opec+ group to hold output steady.

With coronavirus infections spreading rapidly in many parts of the world producers are trying to support prices as demand takes a hit from new lockdowns being put in place.

“Despite this bullish supply agreement, we believe Saudi’s decision likely reflects signs of weakening demand as lockdowns return,” Goldman Sachs said in a note, although the investment bank maintained its year-end 2021 forecast for Brent of $65 a barrel.

Opec member Iran’s seizure of a South Korean tanker in the Gulf on Monday also continued to support prices. Tehran denied it was holding the ship and its crew hostage after seizing the tanker while pushing for Seoul to release $7 billion of funds frozen under US sanctions.

Meanwhile, US crude oil inventories dropped by 1.7 million barrels in the week to Jan 1 to 491.3m barrels, data from industry group the American Petroleum Institute showed late on Tuesday.