Oil prices climb nearly 2 percent on coronavirus vaccine hopes

Oil prices climbed nearly 2% to their highest in more than eight months on Wednesday, as data showing a surprise drop in weekly U.S. crude inventories extended a rally driven by hopes that a COVID-19 vaccine will boost fuel demand.

Brent crude rose 75 cents, or 1.6%, to settle at $48.61 a barrel, its highest since early March.

U.S. West Texas Intermediate crude also closed at its highest since early March, rising 80 cents, or 1.8%, to $45.71.

Both benchmarks, which gained 4% on Tuesday, rose for a fourth straight session.

U.S. crude inventories fell by 754,000 barrels last week, government data showed, surprising analysts who in a Reuters poll had predicted a 127,000-barrel rise. Inventories at Cushing, Oklahoma, the delivery point for WTI, fell by 1.7 million barrels. [EIA/S]

“There was a decent drawdown at Cushing, so that’s supportive. It was probably the most bullish aspect of this report,” John Kilduff, partner at Again Capital LLC in New York.

Still, demand worries capped price gains as U.S. weekly gasoline demand dropped by about 128,000 barrels per day (bpd) to 8.13 million bpd, the lowest since June 2020.

On Monday, investor hopes got a boost as AstraZeneca said its COVID-19 vaccine could be up to 90% effective.

“Crude oil prices are trading at their highest levels since early March, supported by positive market sentiment as a result of vaccine news and strong oil demand in Asia,” said UBS oil analyst Giovanni Staunovo.

“We maintain our bullish outlook for next year and target Brent to hit $60 per barrel at the end of 2021,” he added.

A weaker dollar .DXY also supported crude prices, making greenback-denominated oil less expensive for buyers holding other currencies.