Oil prices climbed over 1% on Wednesday, after an industry report showed U.S. crude inventories have fallen more than expected, while hopes of an effective COVID-19 vaccine continued to bolster sentiment.
Brent crude futures were up 48 cents, or 1.1% to $44.09 a barrel at 0445 GMT, while U.S. West Texas Intermediate (WTI) crude futures also rose 48 cents, or 1.2%, to $41.84 a barrel. Both benchmarks gained nearly 3% on Tuesday.
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.
“Defying analysts’ expectations again, the American Petroleum Institute (API) reported on Tuesday a significant ‘draw’ in crude oil inventories,” said Stephen Innes, chief market strategist at AXI.
Oil prices also “continue to revel on the back of Pfizer’s vaccine announcement,” Innes said.
Both Brent and U.S. oil prices are up more than 10% 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, 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.
Reporting by Koustav Samanta and Aaron Sheldrick; Editing by Ana Nicolaci da Costa and Lincoln Feast.