On Wednesday, Oil prices rose as hopes of an effective COVID-19 vaccine continued to reinforce sentiment, while an industry report showed U.S. crude inventories fell more than anticipated.
Brent crude futures rose $1.01, or 2.3%, to $44.62 a barrel at 0740 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 prospects added 99 cents, or 2.4%, to $42.35 a barrel. Both benchmarks gained nearly 3% on Tuesday.
“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,” said Jeffrey Halley, senior market analyst at OANDA.
Crude stockpiles also fell 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 reduction of 913,000 barrels.
Both Brent and U.S. oil prices are up more than 13% this week since initial trials data showed the experimental COVID-19 vaccine being developed by Pfizer Inc PFE.N and Germany’s BioNTech 22UAy.DE was 90% effective.
Although the positive news on vaccines supports oil prices, the overall fuel demand outlook remains clouded amid re-imposed coronavirus restrictions in Europe and the United States.
“Near-term demand prospects remain weak – particularly given a range of European countries implemented COVID-19 restrictions (albeit to varying degrees) which will negatively impact consumption,” analysts at National Australia Bank said in a note on Wednesday.
“Beyond these measures, demand will take a considerable time to recover – as international travel remains constrained.”
Renewed restrictions in Europe and the United States to combat the coronavirus have slowed fuel demand recovery pace, offsetting a rebound in Asian economies where consumption has almost returned to pre-COVID levels.
“I believe the market will look for evidence of demand recovery before prices kick up seriously higher,” said Sukrit Vijayakar, director of energy consultancy Trifecta.