Oil up for a fourth day on reduced stockpiles and vaccine hopes

London — Oil rose for a fourth straight session on Wednesday as the market shrugged off an industry report showing US crude stockpiles rose more than expected, extending a rally driven by hopes that a Covid-19 vaccine will boost fuel demand.

Brent crude was up 53c, or 1.1%, at $48.39 a barrel by 9.56am GMT, having risen almost 4% in the previous session. West Texas Intermediate (WTI) crude gained 38c, or 0.8%, to $45.29, after rising more than 4% on Tuesday.

“Crude oil prices are trading at their highest levels since early March, supported by positive market sentiment as a result of vaccine news and strong oil demand in Asia,” said UBS oil analyst Giovanni Staunovo. “We maintain our bullish outlook for next year and target Brent to hit $60 per barrel at the end of 2021.” 

AstraZeneca said on Monday that its Covid-19 vaccine was 70% effective in trials and could be up to 90% effective, providing another weapon in the fight to control the pandemic.

The formal start of US president-elect Joe Biden’s transition to the White House has also improved the global outlook.

A weak dollar has also provided support for crude prices as a lower dollar makes oil less expensive for buyers.

“The recent depreciation of the dollar has helped temper the impact of surging oil prices for some of the world’s largest consumers of energy,” said Stephen Brennock of broker PVM.

The market seemed shrug off latest data from the American Petroleum Institute (API) on Tuesday that showed US crude stocks rose by 3.8-million barrels in the week to November 20 to about 490-million barrels. Official US government crude inventory data will be released later in the day.

Analysts also said that a viable vaccine is not likely to be ready for mass use in the next few months, meaning lockdowns and travel restrictions will be in place into next year.

That makes it likely that oil cartel Opec and its allied producers, including Russia (Opec+), will continue production cuts into 2021 after a meeting set to start on November 30 following technical talks this week.

Opec+ producers have been withholding supplies to support prices after pandemic lockdowns earlier this year caused an evaporation in demand. They are currently due to increase production by 2-million barrels per day — about 2% of global demand before the pandemic — from January.

Reuters