Oil prices rose on Wednesday, cutting back losses recorded in early trading, as the news of coronavirus vaccines boosted investors’ sentiment and the optimism of a rebound in fuel demand, dampening worries over a surprise build in the United States oil stockpiles last week.
Brent crude futures edged up by 11 cents or 0.2% to $48.95 per barrel at 08:46 West Africa Time, after appreciating by 5 cents at the previous session. U.S. West Texas Intermediate (WTI) crude futures dipped by 9 cents or 0.2% to $45.69, following a 16 cents fall on Tuesday.
Bonny Light, Nigeria’s premium crude oil grade, weakened by 15 cents or 0.31% to $48.83 at the Tuesday session just as Qua Iboe, another major national grade, declined by 67 cents or 1.38% to $47.81.
The American Petrol Institute Tuesday said U.S. crude oil, gasoline, and distillate inventories increased steeply last week, with crude stocks leaping by 1.14 million barrels in contrast to analyst forecasts in a Reuters poll for a draw of 1.42 million barrels, straining oil prices.
Official weekly oil statistics from the U.S. Energy Information Administration (EIA) is due on Wednesday.
“The build in U.S. crude inventories raised a sense of caution among investors and prompted them to unwind long positions ahead of the EIA data in early trade,” Chiyoki Chen, chief analyst at Sunward Trading, said.
“But brighter news about progress in vaccine development and hopes for U.S. economic stimulus by President-elect Joe Biden kept overall market sentiment upbeat,” Chen said, forecasting the oil prices of both Brent and WTI will be close to $50 a barrel later this month.
The United Kingdom started mass vaccination of its population on Tuesday in a global push that presents one of the biggest logistical hurdles in peacetime era, with the possibility of the development strengthening oil prices.
Pfizer overcame another obstacle on Tuesday when the U.S. Food and Drug Administration issued documents that raised no threat over the safety or efficacy of the vaccine it developed with BioNTech.
The news helped allay fears from an uptick in coronavirus cases around the world that has induced a series of renewed lockdowns, including toughened measures in California, South Korea, and Germany.
“The recent rally looks to be overdone from a fundamental point of view, given rising oil output in Libya and the United States with weaker fuel demand across the globe,” said Kazuhiko Saito of Fujitomi Co.
“But the bullish tone is likely to continue amid hopes the pandemic can be brought under control with vaccines next year,” he said, hinting at the possibility that oil prices could draw strength from the trend.
Hedge fund managers were major buyers of petroleum futures and options last week for a fourth straight week, an indication of rising confidence that coronavirus vaccines will fuel a recovery in oil consumption in 2021 and, in so doing, boost oil prices.
The EIA predicted on Tuesday that U.S. oil production could slide net year by 240,000 barrels per day (bpd) to 11.10 million bpd, a little decline than is the previous prediction for a slide of 290,000 bpd.