* 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
(New throughout, updates prices, market activity and comments;
new byline, changes dateline, previous LONDON)
By Jessica Resnick-Ault
NEW YORK, Feb 2 (Reuters) - Oil prices rose more than 2% on
Tuesday, reaching their highest in 12 months after major
producers showed they were reining in output roughly in line
with their commitments.
The U.S. and global benchmarks rallied as optimism about
more U.S. economic stimulus added to market bullishness from
supply cuts.
Brent crude was up $1.22, or 2.2%, at $57.57 a
barrel by 12:03 EST (1703 GMT) for its third straight day of
gains, touching $58.05, the highest levels since January last
year.
U.S. oil gained $1.26, or 2.3%, to $54.81, after
touching a session high of $55.26, the highest in a year.
The rally began as OPEC production increases were less than
expected.
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.
Russian output increased in January but is in line with the
supply pact, while in Kazakhstan oil volumes fell for the month.
The rally picked up steam as the U.S. Congress looked ready
to adopt an economic stimulus package, and as cold U.S. weather
boosted heating oil demand.
"You got the U.S. economic stimulus package that no one
thought we would get," said Bob Yawger, director of energy
futures at Mizuho in New York.
A cold snap and heavy snow in the U.S. northeast drove the
margin for heating oil to an 8-month high of $15.88, lending
further support to crude.
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.
(Additional reporting by Noah Browning and Aaron Sheldrick
Editing by David Evans, David Goodman and David Gregorio)