UPDATE 6-Oil extends gains after surprise Saudi output cut and U.S. crude draw

* Saudi move 'reflects signs of weakening demand' -Goldman
Sachs
* OPEC output rises in December - Reuters survey
* U.S. crude inventories fell 8 million barrels in week -
EIA

(New throughout, updates prices, market activity and comments,
adds EIA data; new byline, changes dateline, previous LONDON)
By Jessica Resnick-Ault
NEW YORK, Jan 6 (Reuters) - Oil prices extended gains on
Wednesday, rising to their highest since late February, after
Saudi Arabia announced a big voluntary production cut, and as
U.S. crude inventories declined in the latest week.
Brent crude LCO1c was up 88 cents, or 1.7%, to $54.48 a
barrel at 11:24 a.m. EST (1524 GMT). Earlier in the session, it
hit a high of $54.63 a barrel, a level not seen since Feb. 26,
2020.
U.S. West Texas Intermediate (WTI) futures CLc1 were up 75
cents, or 1.5%, to $50.68 a barrel. The contract touched $50.71
a barrel, its highest since Feb. 25.
Both contracts were up about 5% on Tuesday.
U.S. crude stocks fell sharply while fuel inventories rose,
the Energy Information Administration said on Wednesday, and
2020 came to a close with a sharp decline in overall demand due
to the coronavirus pandemic. EIA/S
Crude inventories USOILC=ECI fell by 8 million barrels in
the week to Jan. 1 to 485.5 million barrels, exceeding analysts'
expectations in a Reuters poll for a 2.1 million-barrel drop.
The drop in crude stocks is typical for the end of the year,
when energy companies take barrels out of storage to avoid hefty
tax bills.
"We had a very substantial crude oil inventory draw helped
by a second week of very robust crude oil exports as well as an
increase in refinery utilization now exceeding 80%," said Andrew
Lipow, president of Lipow Oil Associates in Houston.
High refinery consumption may be short-lived, said Bob
Yawger director of energy futures at Mizuho in New York.
"We've burned through a lot of crude oil to make a lot of
product, and there's no demand for the product," he said. "You
can't run at that high a rate forever, with the numbers what
they are."
Saudi Arabia, the world's biggest oil exporter, said on
Tuesday it would make additional, voluntary oil output cuts of 1
million barrels per day (bpd) in February and March, after a
meeting of OPEC+, which groups the Organization of the Petroleum
Exporting Countries and other producers, including Russia.
With coronavirus infections spreading rapidly, producers are
wary of a further hit to demand.
OPEC+ agreed most producers would hold output steady in
February and March while allowing Russia and Kazakhstan to raise
output by a modest 75,000 bpd in February and a further 75,000
bpd in March.
"Despite this bullish supply agreement, we believe Saudi's
decision likely reflects signs of weakening demand as lockdowns
return," Goldman Sachs analysts wrote in a note, though they
maintained an end-2021 forecast for Brent of $65 a barrel.
OPEC oil output rose for a sixth month in December to 25.59
million bpd, a Reuters survey found, buoyed by further recovery
in Libyan production and smaller rises elsewhere.