London — Benchmark Brent oil rose to a more than two-month high above $45 a barrel on Wednesday on hopes of an effective COVID-19 vaccine and an industry report showing U.S. crude inventories fell more than expected.
Brent was up $1.02, or 2.3%, at $44.63 at 1330 GMT after hitting a session high of $45.30 – the first time it cleared the $45 threshold since early September.
U.S. West Texas Intermediate (WTI) crude added 96 cents, or 2.3% to reach $42.32 a barrel.
Both benchmarks had gained nearly 3% on Tuesday.
“This week’s news about a coronavirus vaccine was encouraging and, alongside short-covering activity, strongly supported oil prices on Monday and Tuesday,” said Giovanni Staunovo, oil analyst for UBS.
The bank cautioned that European lockdowns and restored Libyan oil output could weigh on prices in the short term, but forecast oil at $60 a barrel by the end of 2021 based on the likelihood that producers would continue to rein in supply.
U.S. crude stockpiles fell by 5.1 million barrels last week to about 482 million barrels, industry group data showed on Tuesday, compared with analysts’ expectations in a Reuters poll for a reduction of 913,000 barrels.
Both Brent and U.S. oil prices are up around 14% this week since initial trials data showed the experimental COVID-19 vaccine being developed by Pfizer Inc and Germany’s BioNTech was 90% effective.
Although oil prices are supported by the positive news on the vaccine, the fuel demand outlook remains clouded as coronavirus restrictions have been reimposed in Europe.
“With oil demand in the red against supply, such price levels are not justified for the short-term”, Rystad Energy’s head of oil markets Bjornar Tonhaugen said.
Renewed restrictions in Europe and the United States to combat the coronavirus have slowed the pace of the fuel demand recovery, offsetting a rebound in Asian economies where consumption has almost returned to pre-COVID levels.
(Additional eporting by Koustav Samanta and Aaron Sheldrick; Editing by Richard Pullin and Edmund Blair)