Oil futures extended gains Tuesday, a day after the global crude benchmark closed at an eight-month high, as bullish traders cheered progress toward a vaccine.
The U.S. benchmark, West Texas Intermediate crude, traded at its highest since August. Oil was lifted Monday after AstraZeneca said its COVID-19 vaccine candidate had an efficacy rate of up to 90%.
“Optimists appear to be gaining the upper hand, especially as hardly a day now passes without reports of successful vaccine tests. This is making the market increasingly confident that the economy will quickly normalize, and with it oil demand, despite current data offering no reason for optimism,” said Eugen Weinberg, commodity analyst at Commerzbank, in a note.
WTI crude for January delivery rose 58 cents, or 1.3%, to $43.64 a barrel on the New York Mercantile Exchange, while January Brent crude, the global benchmark, was up 48 cents, or 1%, at $46.52 a barrel on the New York Mercantile Exchange.
Crude has been in an upswing since early November, after Pfizer Inc. and BioNTech SE said their vaccine candidate was highly efficacious. The companies on Friday sought emergency approval from the Food and Drug Administration for the vaccine. Moderna Inc. last week said its vaccine candidate was also highly successful in preventing infections in a late-stage trial.
Oil’s gains come as equities continue to push higher, buoyed by rising appetite for risk by investors despite a continued surge in COVID-19 cases. Stock-index futures pointed to strong gains for equities, with support also tied to the Trump administration clearing the way for the transition process to begin.
While investors had been preparing for Democrat Joe Biden to become president in January following his Nov. 3 election victory, the move eased fears over a protracted spat as Trump’s long-shot efforts to overturn the results produced a string of legal defeats for his campaign.
The January Brent contract moved to a premium to the February contract on Monday, a condition known as “backwardation.” That phenomenon, along with a fading “contango” picture along the futures curve were seen by traders as a positive signal for demand.
Expectations the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, will agree next week to delay a relaxation of output curbs scheduled for Jan. 1. were also a bullish factor, analysts said.
Weinberg noted that Libya, which wasn’t subject to the existing output cuts, has seen its production rise to over 1.2 million barrels a day after resuming earlier this year after local military commanders lifted port blockades.
He noted that Libya’s National Oil Corp. has indicated it would commit to the OPEC+ agreement if it achieved production of 1.7 million barrels a day — a level that likely equates to the country’s maximum production capacity.
“This misses the whole point of the concept of voluntary reduction and cooperation,” Weinberg said.
January gasoline futures rose 2.3% to $1.228 a gallon, while January heating oil was up 2% at $1.3425 a gallon.
January natural-gas futures were up 2% at $2.88 per million British thermal units.