Oil prices climbed on Wednesday as news about COVID-19 vaccines lifted investor hopes for a recovery in fuel demand and the U.S. dollar, in which oil is traded, reached 2 1/2-year lows.
Brent crude rose 51 cents, or 1%, to $49.35 a barrel by 1405 GMT. U.S. West Texas Intermediate (WTI) crude CLc1> climbed 51 cents, up 1%, to $49.35.
The U.S. dollar fell on Wednesday as vaccine progress boosted risk appetite and prospects of more U.S. fiscal stimulus amid negotiations over an economic relief package amid the pandemic.
“The U.S. dollar index futures curve has dropped by nearly 13% since 15 March 2020, when international investors flocked to the greenback as a safe haven,” said Rystad Energy analyst Louise Dickson.
“A weaker dollar in the short-term is a boon for oil prices”.
The American Petroleum Institute (API) said on Tuesday that U.S. crude oil, gasoline and distillate stocks rose sharply last week, with crude stocks jumping by 1.14 million barrels against analyst forecasts for a draw of 1.42 million barrels.
Official weekly oil data from the U.S. Energy Information Administration (EIA) is due later on Wednesday.
Britain began mass vaccinations on Tuesday. Expectations that others will soon follow helped offset fears about a sharp rise in coronavirus cases globally that has led to new restrictions on movements around the world.
The vaccine news helped offset some fears from a sharp rise in coronavirus cases globally that has led to a string of renewed lockdowns, including strict measures in California, Germany and South Korea.
“The worsening COVID situation, in particular in Europe, is weighing on prices,” research firm JBC Energy said.
On the supply front, the EIA said U.S. crude oil production was expected to slide next year by 240,000 barrels per day (bpd) to 11.10 million bpd, a smaller decline than its previous forecast for a slide of 290,000 bpd.