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* OPEC output increase smaller than expected -poll
* UBS sees Brent at $63 mid-year, Goldman predicts $65
* BP cites declining product demand and retail sales
* U.S. blizzard could lift product demand
(Updates prices)
By Noah Browning
LONDON, Feb 2 (Reuters) - Oil prices rose more than 2% on
Tuesday, reaching its highest in nearly 12 months after major
producers showed they were reining in output roughly in line
with their commitments.
Brent crude was up $1.31, or 2.3%, at $57.66 a
barrel by 1500 GMT for its third straight day of gains and the
highest levels since February last year.
U.S. oil gained $1.33, or 2.5%, to its highest since
early March at $54.88.
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 through 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 that Brent crude would reach
$63 a barrel by the second half of this year and $65 by the
first quarter of 2022. Goldman Sachs said it expected the
benchmark to reach $65 by July.
Russian output increased in January but is in line with the
supply pact, while in Kazakhstan oil volumes fell for the month.
However, energy giant BP flagged a difficult start to
2021 amid declining product demand, noting that January retail
volumes were down about 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 seen returning to their five-year
average by the middle of the year.
Helping to support prices, a severe blizzard in the north
east of the United States is pushing up demand for heating fuel.
(Reporting by Noah Browning and Aaron Sheldrick
Editing by David Evans and David Goodman
)
