Oil rises amid vaccine optimism

Singapore — Oil prices rose on Wednesday, boosted by demand hopes on progress made in US vaccine rollouts, while uncertainty over how much supply Opec+ will restore to the market at its Thursday meeting and a big build in US crude stocks capped gains.

US West Texas Intermediate (WTI) crude futures rose 18c, or 0.3%, to $59.93 a barrel by 3.56am GMT, recovering from three days of losses.

Brent crude futures rose 29c, or 0.46%, to $62.99 a barrel, up from four days of losses.

Both futures had dipped in Asia’s early morning trading.

Demand recovery hopes thanks to the rollouts of vaccine kept oil prices supported, analysts said.

The US will have enough Covid-19 vaccine for every American adult by the end of May, President Joe Biden said on Tuesday after Merck & Co agreed to make rival Johnson & Johnson’s inoculation.

Meanwhile, the market’s attention is on a forthcoming Thursday meeting by oil cartel Opec and allies, together called Opec+, at a time when they are generally positive on the oil market outlook compared with a year ago when they slashed supply to boost prices.

The market widely expects them to ease production cuts, which were the deepest ever, by about 1.5-million barrels a day, with Opec’s leader, Saudi Arabia, ending its voluntary production cut of 1-million barrels a day.

However, a JTC document, seen by Reuters, called “for cautious optimism”, citing “the underlying uncertainties in the physical markets and macro sentiment, including risks from Covid-19 mutations that are still on the rise”.

Reinforcing the concern of potential oversupply, the American Petroleum Institute industry group reported US crude stocks rose by 7.4-million barrels in the week to February 26, in stark contrast to analysts’ estimates for a draw of 928,000 barrels.

“The recent sell-off may help reinforce Saudi’s cautious stance and delay any production increase,” said Stephen Innes, global market strategist at Axi.

“It’s probably something that could sway the Opec+ increase more back towards the 500,000 barrels a day as opposed to the 1.5-million barrels a day,” he said.

Reuters