Oil prices keep rising after eight-month high on demand optimism

Oil kept rising after closing at a eight-month high on increasing optimism that recent Covid-19 vaccine breakthroughs will lead to a swift recovery in global energy demand next year.

Futures in New York climbed around 1 per cent to trade above $45 a barrel as a broader financial markets rally continued. Global benchmark Brent could reach $60 a barrel by the summer of 2021 as the easing of travel restrictions boosts demand for fossil fuels, according to Bank of America.

In another positive sign for consumption, Premier Li Keqiang said China, the world’s biggest oil importer, will likely return to a more “proper” range of economic development in 2021. China and Japan also agreed to restart some two-way travel by the end of November. Crude surged 4.3 per cent on Tuesday after the triggering of a formal transition process to US President-elect Joe Biden.

Oil’s value has increased by more than a quarter this month amid positive results for three Covid-19 vaccines. It’s reclaimed heights not seen since the pandemic devastated global demand in March even as a resurgent virus prompted more lockdown measures. Expectations that OPEC and its allies will delay an increase in production planned for January have also aided the rally.

The investor mood has been lifted by the developments around vaccines and the likely extension of the Opec+ output cuts, said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group. “The market is fairly well-priced and should continue gains in the coming days.”

Goldman Sachs Group said in a note that it expects Opec+ to delay its planned 2 million barrel a day output ramp-up by three months. 

It forecast Brent would average $47 a barrel next quarter if this happens.