Benchmark Brent oil rose to a more than two-month high above $45 a barrel on Wednesday on hopes for an effective Covid-19 vaccine and an industry report showing US crude inventories fell more than expected.
Brent was up $1.41, or 3.2%, at $45.02 at 1118 GMT, the first time it cleared the $45 threshold since early September. US West Texas Intermediate (WTI) crude also added $1.41, or 3.4%, to $42.77 a barrel. Both benchmarks had gained nearly 3% on Tuesday.
“This week’s news about a coronavirus vaccine was encouraging and, alongside short-covering activity, strongly supported oil prices on Monday and Tuesday,” said Giovanni Staunovo, oil analyst for UBS.
The bank cautioned that European lockdowns and restored Libyan oil output could weigh on prices in the short term, but forecast oil at $60 a barrel by the end of 2021 based on the likelihood that producers would continue to rein in supply.
US crude stockpiles 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 around 14% 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 the vaccine, the overall fuel demand outlook remains clouded as coronavirus restrictions are re-imposed in Europe and the United States.
“Hopes for a return to pre-Covid normalcy next year have been given a huge boost this week. Before then, however, a difficult winter is on the cards. Infection rates are still accelerating in several parts of the world including the US,” said Stephen Brennock of broker PVM.
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.
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