Oil surged more than 8% on Monday, putting it on track for its biggest daily gain in more than six months after Pfizer announced promising results for its COVID-19 vaccine, boosting risk assets around the globe.
Brent crude was up $3.11, or 7.9%, at $42.56 a barrel, while U.S. West Texas Intermediate crude settled up $3.15, or 8.5%, to $40.29.
Both contracts rose more than $4 earlier in the session and traded more than 120% of last session's volumes.
"The oil complex is joining in the bullish euphoria of today's optimistic vaccine headlines as well as the weekend election results by trailing the equities higher," said Jim Ritterbusch of Ritterbusch and Associates in Houston.
Pfizer said its experimental vaccine was more than 90% effective in preventing COVID-19, based on initial data from a large study, a victory in the battle against a pandemic that has forced lockdowns around the world and led to a drop-off in fuel demand.
Wall Street, which oil prices often follow, reached all-time highs after the announcement.
Meanwhile, Saudi Arabia said an OPEC+ oil output deal could be adjusted to balance the market. The kingdom's energy minister Prince Abdulaziz bin Salman said the OPEC+ deal on oil output cuts could be adjusted if there was consensus among members of the group, increasing the prospect of tighter supplies and higher oil prices.
OPEC+, which includes Organization of the Petroleum Exporting Countries (OPEC) states, Russia and other producers, is currently cutting 7.7 million barrels per day (bpd), and is considering reducing those cuts to 5.7 million bpd from January. If OPEC+ maintains the current curbs on output, it would tighten supply and lead to higher prices.
Key members of OPEC are wary of U.S. President-elect Joe Biden relaxing measures on Iran and Venezuela, which could mean an increase in oil production that would make it harder to balance supply with demand.
"While a Biden presidency increases the likelihood of Iranian oil supply returning to the market, this is not something that will happen overnight, and we still believe it's more likely an end of 2021/2022 event," ING said in a note.