Oil prices rise to 9-month high on vaccine rollout, stimulus hopes

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

Oil prices gained on Monday amid hopes that a rollout of coronavirus vaccines will lift global fuel demand.

Brent crude futures for February rose 32 cents, or 0.6%, to $50.29 a barrel, while U.S. West Texas Intermediate crude futures for January were up 42 cents, or 0.9%, at $46.99 a barrel, its highest level in nine months.

Brent and WTI have rallied for six consecutive weeks, their longest stretch of weekly gains since June.

"Price momentum has slowed appreciably during the past couple of weeks and while some fresh or unexpected bullish headlines may be required to advance the complex into new high territory, we will also note a market that appears to have developed immunity to bearish headlines that would normally be slapping the complex down," Jim Ritterbusch, president of Ritterbusch and Associates, said.

Signs of rising supply have weighed on the market. Libyan oil production stood at 1.28 million barrels per day on Monday, a National Oil Corporation (NOC) source said, up from 1.25 million bpd in late November.

In the United States, energy firms last week added the most oil and natural gas rigs in a week since January as producers continued to return to the wellpad.

Global onshore crude inventories in December are still well above 2019 and 2018 levels, market intelligence firm Kpler said, with the biggest onshore builds this year seen in China .

"Whilst the sharp jump of global stocks from the beginning of the Covid pandemic in spring to summer mirrored anemic fuels demand early this year, a still historic high volume of crude oil stocks indicates worldwide demand hasn't yet bounced back to pre-Covid levels," the firm said in a note.

Major European countries continued in lockdown mode to curb the spread of COVID-19 which has reduced fuel demand. For example, Germany, the fourth largest economy in the world, plans to impose a stricter lockdown from Wednesday to battle the virus.

In early trading, prices rose after a shipping firm said an oil tanker was hit in the Saudi port of Jeddah, which the energy ministry called a terrorist act.

"Traders have for years now been used to tensions flaring in the region and when that happens, oil markets tick up," said Bjornar Tonhaugen, Rystad Energy's head of oil markets.

"(The blast) has caused concerns for stability in the major oil hub of Jeddah and for overall traffic security in the region."

The United States kicked off its vaccination campaign against COVID-19, lifting hopes that pandemic restrictions could end soon and lift demand in the world's largest oil consumer.

"Brent crude is supported by both financial and physical flows. The dollar is declining, the Brent crude curve is in backwardation and vaccines are being rolled out," said SEB chief commodity analyst Bjarne Schieldrop.

"We think that this rally has further to go."

Meanwhile, OPEC+ has postponed meetings of its Joint Technical Committee and Ministerial Monitoring Committee until Jan. 3 and 4, OPEC said in a statement on Monday.

Also pressuring prices, OPEC said global oil demand will rebound more slowly in 2021 than previously thought because of the lingering impact of the coronavirus pandemic, hampering efforts by the group and its allies to support the market.