Oil gains after stockpile draw amid hopes for coronavirus vaccine

AFP  File

US West Texas Intermediate (WTI) crude futures edged up 16 cents, or 0.4 per cent, to US$40.45 a barrel by 0805 GMT, while Brent crude futures rose 9 cents, or 0.2 per cent, to US$42.49.

Oil prices rose sharply on Wednesday as positive news on a Covid-19 vaccine continued to boost sentiment and industry data showed US crude inventories dropped more than expected last week. Investors who are wary of the coronavirus as we head deeper into the reportedly more perilous winter months see the vaccine as a boon for oil, which could help to shore up a fragile USA economy.

Both benchmarks rose by almost 3% on Tuesday.

Crude futures (CL=F) climbed to their highest level since the start of September on Wednesday, while Brent futures (BZ=F) were also at a multi-month high.

Both contracts jumped 8% on Monday, in their biggest daily gains in more than five months, after drugmakers Pfizer PFE.N and BioNTech 22UAy.F said an experimental COVID-19 treatment was more than 90% effective based on initial trial results.

Oil prices rose over 1% on Wednesday following a report stating that USA crude inventories have declined beyond expectations.

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Crude oil prices rose sharply on Monday and Tuesday supported as coronavirus vaccine optimism revived hopes for a steady rebound in the global energy demand.

The expectation that a vaccine could restore demand for transportation fuels is critical for oil, said John Kilduff, founding partner at Again Capital.

However, analysts say renewed lockdown measures in European to contain the coronavirus infections still appear set to affect the outlook for global oil demand.

With COVID-19 cases rising and prices under pressure, Algeria has said it supports keeping the current cuts in place while Saudi Arabia this week said that the deal could be tweaked, perhaps beyond what analysts expect.

"While a Biden presidency increases the likelihood of Iranian oil supply returning to the market, this is not something that will happen overnight, and we still believe it's more likely an end of 2021/2022 event", ING said in a note. While there has been optimism over a potential vaccine in the USA, the key reasons for the fall in demand for this year are the recent fresh lockdowns and curfews in many key European economies such as the UK, France, Germany, and Italy.

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