By Saket Sundria and Alex Longley on 11/25/2020
(Bloomberg) –Oil extended gains, trading at its highest level since March, on mounting optimism that recent breakthroughs on a Covid-19 vaccine will lead to a swift recovery in global energy demand next year.
Futures in New York rose 1.3% to trade above $45 a barrel. That followed a flurry of tenders from Chinese and Indian refiners seeking crude oil for January, the latest sign of roaring strength in Asian markets.
With the prospect of a coronavirus vaccine improving oil’s longer-term outlook, there’s been a renewed rally in the forward curve. On Wednesday the much-watched spread between Brent’s nearest two December contracts briefly flipped into a bullish backwardation for the first time since March.
Oil’s value has risen by more than a quarter this month amid positive vaccine results. With the market’s prospects picking up, Brent crude could reach $60 a barrel by the summer of 2021, according to Bank of America Corp. Attention is now turning to the next move from the Organization of Petroleum Exporting Countries and its allies, who meet next week to discuss production policy.
“The recent news around Covid-19 vaccines has boosted crude prices as markets start to look to a return to some sort of normality in 2021,” said HSBC Bank analyst Gordon Gray. “We expect OPEC+ to err on the side of caution as it evaluates how the market evolves.”
- West Texas Intermediate for January delivery rose 1.3% to $45.51 a barrel as of 10:57 a.m. in London
- Brent advanced 1.6% to $48.64 a barrel
As well as the structure of the futures curve, prices further out have also been moving higher. WTI prices for 2021 were at their strongest level since March early on Wednesday, while those for 2022 topped $45 to reach their highest since September. The higher forward prices are boosting the incentive for oil producers to lock in their supplies for the coming years.
The American Petroleum Institute, meanwhile, reported a 3.8 million-barrel increase in U.S. crude inventories, according to people familiar with the data. That would be a third straight week of gains if confirmed by government figures due later on Wednesday. The median estimate in a Bloomberg survey shows inventories probably rose by 225,000 barrels last week.
Other oil-market news:
- Nigeria’s efforts to revamp its aging refineries may be bogged down amid a lack of resources, but Africa’s top oil producer is moving ahead with mini-plants in an effort to help end its dependency on fuel imports.
Seven tankers loaded with about 4.5 million barrels of Libyan crude and condensate are anchored off Malta, as the North African oil producer boosts output and exports more quickly than buyers expected.