Oil prices extend gains, at highest levels since early March, on coronavirus vaccine

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Oil prices climbed for a fourth straight session on Wednesday, shrugging off a report showing US crude inventories rose more than expected and extending a rally driven by hopes that a COVID-19 vaccine will boost fuel demand.

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Brent crude rose 43 cents, or 0.9 percent, at $48.29 a barrel by 1442 GMT, adding to a 4 percent gain the previous session.

US West Texas Intermediate crude gained 53 cents, or 1.2 percent, to $45.44, after rising more than 4 percent on Tuesday.

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“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.

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

AstraZeneca said on Monday its COVID-19 vaccine could be up to 90 percent effective, providing another weapon in the fight to control the pandemic.

A weaker dollar also supported crude prices as a lower greenback makes oil less expensive for buyers holding other currencies.

“The recent depreciation of the US dollar has helped temper the impact of surging oil prices for some of the world’s largest consumers of energy,” said Stephen Brennock of broker PVM.

Brent has moved into backwardation, a market structure in which oil for immediate delivery costs more than supply later. Backwardation encourages inventories to be drawn down and suggests lingering fears about a glut have receded.

Brent futures for February delivery were trading 13 cents above January contracts, the highest since July.

Investors were unpeturbed by Tuesday’s data from the American Petroleum Institute (API) showing US crude stocks rose by 3.8 million barrels in the week to November 20 to around 490 million barrels, a higher level than forecast.

Official US inventory data is due out on Wednesday.

“Positive vaccine news and swift deployment views are behind a significant part of this move in the curve, supported by increasingly firm beliefs by the market that OPEC+ will extend its current output targets for Q1 2021,” said Rystad Energy’s analyst Bjornar Tonhaugen.

OPEC+, made up of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, is leaning towards delaying next year’s planned increase in output despite a rise in prices, three sources close to OPEC+ said.

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