Oil rose as more countries approved Covid-19 vaccines, boosting the demand outlook into next year.
Futures extended gains after the dollar reversed an earlier increase, making crude more attractive for investors. There are also continuing signs of robust demand in Asia with Chinese refiners moving early to buy crude from as far afield as the North Sea. Indian Oil, which has been seeking spot cargoes in recent days, said the nation’s petroleum products consumption is almost back to normal.
Crude has surged to near a nine-month high, with Brent approaching $50 a barrel. The market’s structure is also suggesting tighter supplies, making traders shrug off the second-biggest ever increase in US crude inventories.
While Covid-19 cases are rising in some parts of the world, Canada became the latest country to approve a vaccine and Chicago said it will offer free inoculations to all adults next year.
“The pulse of oil markets remains wedged between the push-and-pull stemming from rising virus cases in the US and Europe,” and potential Covid-19 vaccines, said Ehsan Khoman, head of MENA research at MUFG Bank.
It’s not just Asia where demand is recovering. There are also some bright spots in Europe as well. The UK, which emerged from a second lockdown this month, saw road fuel sales jump by almost 10% last week. Fuel use in Brazil has surpassed pre-virus levels.
Still, it’s a less certain picture in the U.S., where gasoline consumption has dropped to the lowest since May.The oil market’s price structure remains healthy. Brent’s nearest timespread is trading in a bullish backwardation -- where nearby futures are more expensive than later ones - indicating supply is tightening.