Oil prices up on virus vaccine hopes, EU stimulus deal

[NEW YORK] Oil prices rose about US$1 a barrel on Tuesday, hitting the highest level in more than four months with a boost from a European Union stimulus deal and hopeful news about coronavirus vaccine trials.

Brent crude futures settled at US$44.32 barrel, rising US$1.04, or 2.4 per cent. West Texas Intermediate (WTI) settled at US$41.96 a barrel, gaining US$1.15, or 2.8 per cent.

Prices pared gains in post-settlement trade after the American Petroleum Institute, an industry group, reported US crude inventories grew last week by 7.5 million barrels compared with expectations for a draw of 2.1 million barrels.

Oil was buoyed by an agreement among European Union leaders on a 750 billion-euro (S$1.2 trillion) fund to prop up coronavirus-hit economies.

The EU deal allows the European Commission to raise billions of euros on capital markets on behalf of all 27 states, an unprecedented act of solidarity in almost seven decades of European integration.

World shares and the euro also hit their highest levels in several months. The dollar, in which most oil contracts are priced, fell to its lowest since March against a basket of currencies.

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Oil prices were supported by promising coronavirus vaccine data released on Monday, though a vaccine remained months away at best. Several companies are testing new drugs for immunity to Covid-19.

Oil prices also drew support from expectations that US lawmakers could soon agree on a new stimulus package, as extended unemployment aid for millions of Americans will expire at month-end.

"Apparent progress on the US stimulus deal, the EU recovery agreement and progress toward a successful vaccine have all merged this week to kick up demand for risky assets," said Jim Ritterbusch of Ritterbusch and Associates.

Countries including the United States and India are reporting record numbers of coronavirus infections and others such as Spain and Australia are battling new outbreaks.

REUTERS