An oil tanker is seen at Jose refinery cargo terminal in Venezuela in this undated file photo. Picture: REUTERS/Jorge Silva
An oil tanker is seen at Jose refinery cargo terminal in Venezuela in this undated file photo. Picture: REUTERS/Jorge Silva

Melbourne — Oil prices rose on Thursday, taking the week’s gains to more than 11% on growing hopes that producers will hold off on a planned supply increase as soaring cases of Covid-19 dent fuel demand.

US West Texas Intermediate (WTI) crude futures climbed 12c, or 0.3%, to $41.57 a barrel at 4.36am GMT, while Brent crude futures rose 9c, or 0.2%, to $43.89 a barrel.

Algeria’s energy minister said on Wednesday that Opec+ — the grouping of the Organisation of the Petroleum Exporting Countries (Opec) and other suppliers including Russia — could extend current production cuts of 7.7-million barrels a day into 2021, or deepen them further if needed.

The weakening outlook has piled pressure on Opec+ to hold back a supply increase of 2-million barrels a day scheduled for January, with the market now pricing in a delay, analysts said.

Brent and WTI have soared this week, lifted by hopes that the global coronavirus pandemic can be brought under control after initial trial data showed an experimental Covid-19 vaccine being developed by Pfizer and Germany’s BioNTech was 90% effective.

“It’s great news, no question about that, but it will take time for vaccines to be rolled out, and therefore it will take time for demand to be positively impacted by that,” said Lachlan Shaw, National Australia Bank’s head of commodity research.

In the meantime, fuel demand is under pressure from rising infections in Europe, the US and Latin America. As a result, Opec has said demand will rebound more slowly in 2021 than previously thought.

“In many ways the market is looking forward into 2021, to a time when we do have vaccines rolling out, and to a time when Opec and allies have held back some of those scheduled supply increases,” National Australia Bank’s Shaw said.

Analysts at ANZ Research said the outlook for crude oil demand has darkened because of new pandemic restrictions which could push the market back into surplus in the fourth quarter.

“We feel Opec has no choice but to delay output increases, most likely by three months,” they said.

Reuters

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