Oil prices rise as vaccines raise hopes of demand increase

London — Oil prices rose on Wednesday as news about Covid-19 vaccines lifted investor hopes for a recovery in fuel demand and outweighed concerns sparked by figures indicating US oil inventories jumped last week.

Brent crude rose 57c, or 1.2%, to $49.41 a barrel by 9.55am GMT. US West Texas Intermediate (WTI) crude climbed 57c, or 1.3%, to $46.17.

The American Petroleum Institute (API) said on Tuesday that US crude oil, petrol and distillate stocks rose sharply last week, with crude stocks jumping by 1.14-million barrels against analyst forecasts for a draw of 1.42-million barrels.

Official weekly oil data from the US Energy Information Administration (EIA) is due later on Wednesday.

“Though vaccine rollouts have already begun in some countries, their impact will not be felt for a while yet,” Stephen Brennock of oil broker PVM said. “Add to that the spectre of a post-Christmas wave of infections, and it becomes clear that the near-term oil demand outlook is still very much under the Covid-19 shadow.”

Britain began mass vaccinations on Tuesday. Expectations that others will soon follow helped offset fears about a sharp rise in coronavirus cases globally that has led to new restrictions on movements around the world.

Hedge fund managers were substantial buyers of petroleum futures and options last week for a fourth week in a row, a sign of increasing confidence that coronavirus vaccines will drive a recovery in oil consumption next year.

On the supply front, the EIA said US crude oil production was expected to slide in 2021 by 240,000 barrels per day (bpd) to 11.10-million bpd, a smaller decline than its previous forecast for a slide of 290,000 bpd. 

Reuters