Oil prices rise on vaccine optimism, weaker dollar

London

OIL prices edged higher on Wednesday on a weakening dollar and progress on Covid-19 vaccine rollouts, though gains were capped by a surprise gain in US crude inventories and tighter virus lockdowns in Europe.

Brent crude futures rose 25 cents, or 0.5 per cent, to US$51.01 a barrel by 1017 GMT. US West Texas Intermediate (WTI) crude futures were up 21 cents, or 0.4 per cent, at US$47.83.

"A weak dollar is helping support the price but the market is riding a wave of vaccine optimism. Yesterday, we had a strong rally due to the impending approval of a second Covid-19 vaccine," said Harry Tchilinguirian, head of commodity research at BNP Paribas. The dollar on Wednesday hit its lowest level against a basket of currencies since April 2018.

Meanwhile, Moderna Inc's Covid-19 vaccine appeared set for regulatory approval this week after US Food and Drug Administration staff endorsed it as safe and effective. The United States also expanded its rollout of the newly approved vaccine developed by Pfizer Inc and German partner BioNTech SE.

The mood was dampened, however, by rising US crude stocks and European lockdowns. US crude inventories swelled by two million barrels in the week to Dec 11 to about 495 million barrels, according to industry group API. Analysts had expected a draw of 1.9 million barrels, a Reuters poll showed. Despite the optimism surrounding the rollout of Covid-19 vaccines, the International Energy Agency (IEA) warned on Tuesday that the shattering blow to global oil demand will not be reversed quickly.

The IEA revised down its estimates for oil demand this year by 50,000 barrels per day (bpd) and for next year by 170,000 bpd, citing scarce jet fuel use as fewer people travel by air. REUTERS