Oil prices rise on high hopes for vaccine

Melbourne

OIL prices rose on Tuesday as high hopes that a Covid-19 vaccine could be on the horizon were enough to cancel out fears that fuel demand is set to weaken in the near term in coronavirus-hit countries in Europe and the United States.

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.

"A viable vaccine is unequivocally game-changing for oil - a market where half of demand comes from moving people and things around," JP Morgan said in a note. "But as we have written previously, oil is a spot asset that must first clear current supply and demand imbalances before one-to-two-year out prices can rise."

Rystad Energy said lockdowns in Europe could result in the loss of a further one million barrels per day of oil demand by the end of this year.

Its head of oil markets Bjornar Tonhaugen said: "The fast-tracking of multiple vaccines doesn't mitigate the risk that many US states will have to return to some form of lockdown this autumn/winter."

Five analysts polled by Reuters estimated, on average, that US crude stockpiles fell by 1.3 million barrels in the week to Nov 6.

Tuesday's oil price decline was tempered by comments from Saudi Arabia's energy minister, who said on Monday the Organization of the Petroleum Exporting Countries (Opec) and its allies, together known as Opec+, could tweak their supply cut pact if demand slumps before the vaccine is available. REUTERS