Oil extends gain on vaccine hope, weak dollar
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[November 25, 2020] By
Bozorgmehr Sharafedin
LONDON (Reuters) - Oil rose for a fourth
straight session on Wednesday as the market shrugged off an industry
report showing U.S. crude stockpiles rose more than expected, extending
a rally driven by hopes that a COVID-19 vaccine will boost fuel demand.
Brent crude was up 30 cents, or 0.6%, at $48.16 a barrel by 1211
GMT, having risen almost 4% in the previous session.
West Texas Intermediate crude gained 24 cents, or 0.5%, to $45.15, after
rising more than 4% on Tuesday.
"Crude oil prices are trading at their highest levels since early March,
supported by positive market sentiment as a result of vaccine news and
strong oil demand in Asia," said UBS oil analyst Giovanni Staunovo.
"We maintain our bullish outlook for next year and target Brent to hit
$60 per barrel at the end of 2021," he added.
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AstraZeneca said on Monday its COVID-19 vaccine was 70% effective in
trials and could be up to 90% effective, providing another weapon in the
fight to control the pandemic.
The formal start of U.S. president-elect Joe Biden's transition to the
White House has also improved the global outlook.
A weak dollar has also provided support for crude prices as a lower
dollar makes oil less expensive for buyers.
"The recent depreciation of the U.S. dollar has helped temper the impact
of surging oil prices for some of the world’s largest consumers of
energy," said Stephen Brennock of broker PVM.
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The sun is seen behind a crude oil pump jack in the Permian Basin in
Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant
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Brent has moved into backwardation, a market structure in which oil for
immediate delivery costs more than supply later. Backwardation encourages
inventories to be drawn down.
The premium at which Brent crude futures for February delivery were trading
above January stood at 13 cents, the highest level since July.
"Positive vaccine news and swift deployment views are behind a significant part
of this move in the curve, supported by increasingly firm beliefs by the market
that OPEC+ will extend its current output targets for Q1 2021," said Rystad
Energy’s analyst Bjornar Tonhaugen.
OPEC+, made up of the Organization of the Petroleum Exporting Countries (OPEC)
and allies including Russia, is expected to sustain its production cuts into
2021 after a meeting set to start on Nov. 30 following technical talks this
week.
The market seemed shrug off latest data from the American Petroleum Institute
(API) on Tuesday that showed U.S. crude stocks rose by 3.8 million barrels in
the week to Nov. 20 to around 490 million barrels.
Official U.S. government crude inventory data will be released later on
Wednesday.
(Reporting by Bozorgmehr Sharafedin in London; additional reporting by Aaron
Sheldrick in Tokyo; editing by Jane Merriman and Jason Neely)
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