Oil prices rose on Monday after a weak start, adding to the gains of the last three months, although patchy coronavirus vaccine rollouts, new infections and the discovery of new variants are casting a shadow over the demand outlook.
Brent crude futures were up 53 cents, or 1%, at $55.57 a barrel by 0756 GMT, while U.S. West Texas Intermediate (WTI) gained 41 cents, or 0.8%, to $52.61. Both benchmarks gained nearly 8% in January.
Oil prices have been boosted by vaccination programmes getting underway in hard-hit countries and output cuts by major producers like Saudi Arabia. But euphoria over a possible end to the pandemic has been undermined by the slow pace of vaccinations and the rise of new variants of the coronavirus.
Still, with more vaccines proving successful in trials and infections falling in some areas, demand for oil and fuel is likely to pick up as more of the world’s population gets inoculated against COVID-19.
“Our base-case remains for a demand-led rebalancing of the oil market, with the logistical challenges of vaccination likely transient and evidence of still elevated vaccine efficacy,” Goldman Sachs said in a new report, while noting that the rally of recent weeks had paused.
Oil prices are expected to remain around current levels for most of this year before a recovery gains ground towards the end of 2021, a Reuters poll showed late on Friday.
U.S. oil and gas drillers are gearing up for a pick-up in demand and as higher prices make new wells profitable again, adding rigs for a sixth month in a row in January.
U.S. output is rising and was above 11 million barrels per day in November for the first time since April, according to the Energy Information Administration.
Speculators reduced their net long positions in U.S. crude futures and options for the week to Jan. 26, the U.S. Commodity Futures Trading Commission (CFTC) said.
Reporting by Aaron Sheldrick; Editing by Jacqueline Wong and Tom Hogue