Oil prices soar to eight-month high

November 25, 2020: The oil prices on Wednesday reached their highest level since early March 2020 on improved global economic outlook and vaccine optimism.

As of 12:34 pst on Wednesday, WTI crude gained 0.3percent and was trading at $45.2 per barrel, while Brent was trading at $48.22 per barrel, up by 0.5percent.

“With an orderly Presidential transition in sight, vaccine boosters and expectations that OPEC+ will extend production cuts next week, oil markets completely ignored the unexpected 3.8 million-barrel climb in API U.S. crude inventories,” said Jeffrey Halley, senior market analyst at OANDA.

AstraZeneca said on Monday its COVID-19 vaccine was 70% effective in trials and could be up to 90% effective, providing another weapon in the fight to control the pandemic after positive results from other major pharmaceutical developers.

However, any viable vaccine is not likely to be ready for mass use in the next few months, meaning lockdowns and travel restrictions will be in place into next year.

That makes it likely that OPEC+, which groups the Organization of the Petroleum Export Countries (OPEC) and allies including Russia, will continue production cuts into 2021 after a meeting set to start on Nov. 30 following technical talks this week.

OPEC+ producers have been withholding supplies to support prices after pandemic lockdowns earlier this year caused evaporation in demand.

They are currently due to increase production by 2 million barrels per day — about 2% of global demand before the pandemic — from January.

In the United States, President Donald Trump’s administration gave President-elect Joe Biden access to resources enabling him to take over in January after an extended delay despite Trump’s loss in the Nov. 3 election.

The American Petroleum Institute (API), an industry association, said on Tuesday that U.S. crude stocks rose by 3.8 million barrels in the week to Nov. 20 to around 490 million barrels, against analysts’ expectations in a Reuters poll for a build of 127,000 barrels.

Official U.S. government crude inventory data will be released later on Wednesday.

Reuters