Oil rises on hopes for vaccine, falling US stocks

Tokyo

OIL prices climbed on Wednesday as hopes of an effective Covid-19 vaccine continued to bolster sentiment, even as an industry report showed that US crude inventories fell more than expected.

Brent crude futures rose US$1.01 or 2.3 per cent to US$44.62 a barrel in the mid-afternoon Singapore time; US West Texas Intermediate (WTI) crude futures added 99 US cents or 2.4 per cent to US$42.35 a barrel. Both benchmarks had gained nearly 3 per cent on Tuesday.

Jeffrey Halley, senior market analyst at OANDA, said: "There are no signs of a correction in oil markets, with Brent and WTI rising strongly again overnight, as oil traders go all-in on a vaccine-led recovery-boosting demand."

Crude stockpiles had fallen by 5.1 million barrels last week to about 482 million barrels, industry group data showed on Tuesday, compared with analysts' expectations in a Reuters poll for a fall of 913,000 barrels.

Both Brent and US oil prices have been up more than 13 per cent this week, since initial trials data showed that the experimental Covid-19 vaccine being developed by Pfizer Inc and Germany's BioNTech was 90 per cent effective.

Although oil prices are supported by the positive news on the vaccine, the overall fuel demand outlook is clouded amid fresh coronavirus curbs in Europe and the US.

Analysts at National Australia Bank said in a note on Wednesday: "Near-term demand prospects remain weak - particularly given that a range of European countries implemented Covid-19 restrictions (albeit to varying degrees), which will negatively impact consumption. Beyond these measures, demand will take while to recover - as international travel remains constrained."

Sukrit Vijayakar, director of energy consultancy Trifecta, said: "I believe the market will look for evidence of demand recovery before prices really kick up seriously higher." REUTERS