Brent crude on Thursday jumped above $50 a barrel for the first time since March with the rollout of Covid-19 vaccines outweighing concerns about swelling oil inventories.
The UK began a mass vaccination programme this week and it is expected immunisations will start soon in the US and Canada, fuelling optimism of a recovery in oil demand.
“Fast-tracking vaccinations is raising hopes that oil demand will benefit quicker,” said Bjornar Tonhaugen, head of oil markets at Rystad Energy.
Brent crude, the international oil benchmark, rose 4.3 per cent to $50.95 a barrel in afternoon trading in London. West Texas Intermediate, the US marker, increased 4.6 per cent to $47.63 a barrel.
Governments imposed lockdowns and travel bans earlier this year to curb the spread of the virus, slowing the global economy and leading to a collapse in oil demand that took Brent to an 18-year low.
The price crash reversed only after major world producers — including the Opec cartel and Russia — called an end to a price war and agreed in April to a record 9.7m barrels a day in supply cuts to bring the oil market into balance. The reduction in output has since eased to 7.7m b/d.
Oil prices rose on Thursday even as the most recent weekly report on US inventories showed a more than 15m barrel increase in crude stockpiles. This far exceeded expectations of a 1.4m barrel drop.
“It seems that cheap money, good sentiment on the stock market and hopes that demand will soon normalise thanks to corona vaccines count for more than the reality,” said analysts at Commerzbank.
Traders and oil analysts are watching market moves more closely as the Opec+ group seeks to taper their curbs further, adding 500,000 b/d into the market from January.
The increase was much smaller than initially planned as delegates in last week’s meeting took a cautious approach to avoid knocking the fragile recovery in oil prices off course.
Ministers from oil producer countries have been wary as coronavirus cases continue to surge in the US and outbreaks persist in Europe despite new restrictions to stem any further spread of the virus.
Analysts said big crude purchases from Chinese and Indian refineries for the first quarter helped to prop up prices. They also pointed to an attack at an Iraqi oilfield on Wednesday, although it did not affect output.
Shares in global oil and gas companies, which have been hit dramatically this year amid market turmoil, rose on the back of the crude rally. Royal Dutch Shell jumped 3.7 per cent, BP increased 4.5 per cent, ExxonMobil rose 3.5 per cent and Chevron climbed 3.7 per cent.
Letter in response to this article:
Why markets tell real story of Exxon’s activists / From Neil McNaughton, Editor, Oil IT Journal, The Data Room, Sèvres, France