Oil prices rose on Thursday after a fall in U.S. stockpiles added further support following the unilateral decision by Saudi Arabia to cut output over the next two months. A lower dollar, which makes oil cheaper because the commodity is mostly traded using the greenback, is also supporting prices, analysts said.

U.S. crude stocks dropped and fuel inventories rose, the Energy Information Administration said on Wednesday. [EIA/S]

Crude inventories were down by 8 million barrels in the week to Jan. 1 to 485.5 million barrels, against a Reuters poll showing analysts expected a 2.1 million-barrel decline.

The drop in crude stocks is a typical year-end occurrence as energy companies take oil out of storage to avoid tax bills.

UBS raised its forecast for Brent oil prices to $60 per barrel by mid-year, citing the Saudi output decision.

“The Kingdom’s preemptive move suggests to us a desire to defend prices and support the oil market amid demand concerns due to extended mobility restrictions in Europe,” UBS said.

“But if demand falls to a lesser extent, the Saudi move would also help to accelerate the process of reducing oil inventories.”