By Myra P. Saefong and William Watts
WTI, Brent crude both end at highest levels since early March
Oil futures settled higher Thursday, with the global Brent crude benchmark above $50 for the first time in nine months, on progress toward a U.S. COVID-19 vaccine that may lead to a boost in the economy next year.
Brent oil had finished Wednesday (link) a couple pennies higher and U.S. benchmark West Texas Intermediate crude saw a modest decline, mostly shaking off pressure from a sharp rise in U.S. crude inventories -- the largest weekly increase since April.
"Oil prices stood tall even after a massive 15.2-million-barrel crude oil increase in U.S. oil supply" reported by the Energy Information Administration Wednesday, said Phil Flynn, senior market analyst at The Price Futures Group.
"The crude oil market is looking beyond the numbers," he said in a note. "The market held key support and is now focusing on vaccine distribution that could lead to a spike in demand that should drive global supply back below normal levels next year."
Meanwhile, the oil market also took note of reports that suggest Chinese demand is exceeding pre-COVID levels, and there are reports of an "uptick" in Chinese refinery runs, Flynn told MarketWatch.
WTI crude for January delivery rose $1.26, or 2.8%, to settle at $46.78 a barrel on the New York Mercantile Exchange.
The global benchmark, February Brent crude , rose $1.39, or 2.8%, to $50.25 a barrel on ICE Futures Europe.
Prices for WTI and Brent, based on the front months, marked their highest settlements since March 4, according to Dow Jones Market Data.
"There is enough positive vaccine feeling to keep the market in check," said Stephen Innes, chief global markets strategist at Axi, in a note. "The World Health Organization said jumps in weekly COVID-19 cases in the United States and Canada are particularly problematic as winter approaches. But the U.S. is drawing closer to vaccine approval."
An all-day regulatory meeting Thursday is the next step toward the likely authorization (link) of the first COVID-19 vaccine in the U.S. The vaccine, developed by Pfizer Inc. (PFE) and BioNTech SE (BNTX), saw its rollout in the U.K. begin earlier this week after regulators in that country authorized it for emergency use.
Even if a vaccine gets approval in the U.S. soon, "it will be months before enough people are vaccinated to restore economies," said James Williams, energy economist at WTRG Economics. "It will be March or April before we see big reductions in COVID."
In May and June, we may get the dual benefit of a "seasonal decline in the virus and and a large percent of the population vaccinated," he told MarketWatch.
On that note, oil's resilience has frustrated some analysts.
"It seems that cheap money, good sentiment on the stock market and, hopes that demand will soon normalize thanks to corona vaccines count for more than the reality," said Eugen Weinberg, commodity analyst at Commerzbank, in a note.
While the rise in crude inventories was attributed to a surge in imports, increases in gasoline and distillate inventories offered a disturbing picture on fuel demand, he said.
Total products supplied, a proxy for demand, averaged 18.9 million barrels a day over the last four week period ended on Dec. 4, down 7.5% from the same period last year, the EIA reported Wednesday.
On Nymex Thursday, January gasoline tacked on 3.2% to $1.3166 a gallon and January heating oil rose 2.6% to $1.4357 a gallon.
Natural-gas futures also finished higher after the EIA reported on Thursday that domestic supplies (link) of the fuel fell more than expected, down 91 billion cubic feet for the week ended Dec. 4. On average, the data were expected to show a fall of 78 billion cubic feet for the week, according to analysts surveyed by S&P Global Platts. The decline was bigger than the five-year average fall of 61 billion cubic feet, the survey said.
January natural gas settled nearly 4.6% higher at $2.553 per million British thermal units.
-Myra P. Saefong; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
12-10-20 1510ETCopyright (c) 2020 Dow Jones & Company, Inc.