Oil prices climbed on Wednesday as hopes of an effective Covid-19 vaccine continued to bolster sentiment, while an industry report showed US crude inventories fell more than expected.
Brent crude futures rose $1.01, or 2.3% to $44.62 a barrel at 0740 GMT, while US West Texas Intermediate (WTI) crude futures 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 US oil prices are up more than 13% this week since initial trials data showed the experimental Covid-19 vaccine being developed by Pfizer Inc and Germany’s BioNTech was 90% effective.
Although oil prices are supported by the positive news on vaccine, the overall fuel demand outlook remains clouded amid re-imposed coronavirus restrictions in Europe and 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 the pace of fuel demand recovery, 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 really kick up seriously higher,” said Sukrit Vijayakar, director of energy consultancy Trifecta.