Oil rose on expectations that further progress in vaccines against coronavirus will revive global demand, and amid signs of robust consumption in Asia.
West Texas Intermediate futures advanced 2.1 per cent, rising in tandem with stock markets as Pfizer Inc. said a final analysis of clinical-trial data showed its Covid-19 vaccine was 95 per cent effective. An effective treatment is seen as key in reversing this year’s unprecedented slump in fuel use.
Refiners in China, Japan and South Korea snapped up cargoes from Russia, the Middle East and the U.S., leading to a gain in physical crude prices. Buying interest has been strong after some refiners got less oil than usual in term supply contracts from OPEC producers Saudi Arabia and Iraq.
The American Petroleum Institute reported on Tuesday that crude inventories swelled by 4.17 million barrels last week, according to people familiar with the matter. That’s more than double the increase expected from government data due later Wednesday.
Meanwhile, the Organization of Petroleum Exporting Countries and its allies gave reassurance at a committee meeting on Tuesday that they’re ready to act to keep markets stable later this month. The OPEC+ coalition is increasingly minded to delay plans to restore more of the output they’ve halted this year to stave off a glut.
“With OPEC+ not closing the door to a delay in its scheduled tapering of supply cuts, the market appears to be setting aside U.S. oil inventory figures from the API, at least until this afternoon when the official EIA data come out,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA.
Oil rallied above $42 a barrel on Monday after news of another Covid-19 vaccine breakthrough, but prices have since lost some ground as the market grapples with an uneven demand recovery. A resurgent virus in Europe and the U.S. is sapping fuel consumption, compared with Asia where China’s rebound is accelerating, and refiners are buying more crude.
- West Texas Intermediate for December delivery gained 86 cents to $42.29 a barrel on the New York Mercantile Exchange as of 12:25 p.m. London time after climbing 0.2 per cent on Tuesday
- Brent for January settlement rose 2.1 per cent to $44.68 on the ICE Futures Europe exchange after losing 0.2 per cent in the previous session
- Brent’s three-month contango was at 54 cents a barrel, narrowing from $1 at the start of last week
- A smaller contango reflects a rise in the price of prompt contracts relative to later ones, signalling a strengthening market
OPEC+ is scheduled to gather at the end of the month for a ministerial meeting that will set its production policy. A technical panel on Monday suggested the group consider holding off on output increases by three to six months, but Saudi Energy Minister Prince Abdulaziz bin Salman said the jury is out on a possible extension beyond January.
© 2020 Bloomberg L.P.