Oil prices continued to soar on Wednesday over promising coronavirus vaccine news from drug companies and after US President Donald Trump allowed the transition to Joe Biden’s administration to begin.
International benchmark Brent crude was trading at $48.03 per barrel at 0652 GMT on Wednesday with a 0.52% increase after closing Tuesday at $47.78 a barrel.
American benchmark West Texas Intermediate (WTI) was at $45.23 per barrel at the same time with a 0.71% increase after ending the previous session at $44.91 a barrel.
Oil prices reached their highest level since March with Brent hitting $48 a barrel after pharmaceutical companies announced one after another their effective coronavirus vaccines with high level protection. The possibility of a vaccine which will be ready for the first shot soon has increased hopes for an economic recovery and thus a much-expected oil demand rebound.
However, analysts say even if a viable vaccine would be ready in the coming months, easing of the restrictions is expected to take longer, which sustains worries about supply glut.
Investors also hope for a possible extension of OPEC+ production cut deal through 2021.
The OPEC+ group, which has curbed output since January 2017 to support prices, is now reducing production by 7.7 million barrels per day (b/d), down from cuts totaling 9.7 million b/d imposed from May 1 to Aug. 1. The group will meet between Nov. 30 and Dec. 1 to agree on a policy for 2021 onwards.
Developments signaling a peaceful transition of power after Nov. 3 presidential elections in the US have also calmed down the investors, which supports the prices positively.
US President Donald Trump said late Monday he is advising his team to begin "initial protocols" for a transition to President-elect Joe Biden’s administration.
Upward trend in oil prices sustained its momentum after a terrorist attack that caused a fire to break out in a fuel tank at a petroleum products distribution station in the north of Jeddah city in Saudi Arabia.
The Organization of the Petroleum Exporting Countries (OPEC) described the attack as "a cowardly act against a key installation that helps distribute vital energy needs."
While a surge in the coronavirus cases, especially in the US and Europe, continues exerting pressure on oil prices and fueling weak demand concerns amid the oil supply glut, an estimated increase in US crude inventories also limited further price increases.
Late Tuesday, the American Petroleum Institute (API) announced its estimate of a rise of 3.8 million barrels in US crude oil inventories relative to the market expectation of 0.333 million barrels fall.
If crude stocks increase in line with the API’s expectations, it signals that crude demand is falling in the US, the world's largest oil consumer, which negatively affects oil prices.
By Sibel Morrow