London — Oil prices rose on Monday, extending last week’s gains as traders anticipated coronavirus vaccine trials would spur a recovery in demand.
Sentiment was also bolstered by expectations that the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers, a group known as OPEC+, would extend a deal to restrain output.
Brent crude rose 58 cents to $45.54 a barrel by 1435 GMT while U.S. West Texas Intermediate crude gained 35 cents to $42.77 a barrel. Both benchmarks jumped 5% last week.
The contango structure in the market, whereby the prices of front-month delivery contracts are lower than those for delivery six months later, narrowed to as little as 31 U.S. cents, its smallest since mid June, reflecting traders’ views a sustained glut is receding.
Outlook for demand has improved with news indicating progress towards developing COVID-19 vaccines. A U.S. official said the first inoculations in the United States could start a day or two after regulatory approval was secured.
British drugmaker AstraZeneca said on Monday its vaccine, developed along with the University of Oxford, could be around 90% effective.
PVM analyst Stephen Brennock said the news was detaching sentiment from “gloomy fundamentals”.
“Investors are ignoring near-term headwinds, chief among which are surging global COVID infections, and instead looking ahead to next summer,” he said.
On the supply side, OPEC+, which meets on Nov. 30 and Dec. 1., will look at options to extend its deal on output cuts by at least three months from January.
Smaller Russian oil companies are still planning to pump more crude this year, a group representing the producers said.
Yemen’s Iran-aligned Houthi group on Monday said it fired a missile that struck a Saudi Aramco site in the western city of Jeddah. There was no immediate Saudi confirmation of the claim. Aramco’s main oil facilities in are in the east.
Additional reporting by Jessica Jaganathan in Singapore; Editing by Edmund Blair and Barbara Lewis