Energy

Oil jumps to 11-week high on hope of OPEC+ supply increase delay

A view of the Marathon Petroleum Corp's Los Angeles Refinery in Carson, California, April 25, 2020.
Robyn Beck | AFP | Getty Images

Oil prices firmed by more than 1% on Wednesday on hopes OPEC and its allies will delay a planned increase in oil output and after Pfizer said its COVID-19 vaccine was more effective than previously reported.

Brent crude rose 70 cents, or 1.6%, to $44.45 a barrel, while U.S. West Texas Intermediate crude settled 39 cents higher at an 11-week high of $41.82 per barrel.

Prices were also supported by a smaller-than-expected increase in U.S. crude stockpiles last week.

Both contracts jumped by about $1 after Pfizer Inc said that final results from late-stage trial of its vaccine showed it was 95% effective. Last week it had put the efficacy at more than 90%.

Moderna Inc on Monday said that preliminary data for its vaccine also showed it was almost 95% effective.

"Oil prices today are modestly rising on hopes that OPEC+ will decide to postpone its planned production increase in January and on the latest vaccine euphoria," said Rystad Energy's head of oil markets, Bjornar Tonhaugen.

To tackle weaker energy demand amid a second wave of the pandemic, Saudi Arabia called on fellow members of the OPEC+ group to be flexible to meet market needs and to be ready to adjust their agreement on output cuts.

OPEC+, comprising the Organization of the Petroleum Exporting Countries, Russia and other producers, met on Tuesday but made no formal recommendation. The group is due to discuss policy at a full ministerial meeting to be held on Nov. 30 and Dec. 1.

Members of OPEC+ are leaning towards delaying the current plan to boost output in January by 2 million barrels per day (bpd), sources have said. They are considering a possible delay of three or six months.

In the United States, crude inventories rose 768,000 barrels last week, compared with analyst expectations in a Reuters poll for a 1.7 million-barrel rise. Distillate stockpiles, which include diesel and heating oil, fell by 5.2 million barrels, far exceeding expectations.

"There's concern about gasoline demand, but overall inventories, including diesel stocks, fell, giving credence to the efforts of OPEC+ and reduced overall crude production," said Tony Headrick, energy markets analyst at CHS Hedging.