Oil rises more than 1% to 9-month high as vaccine optimism offsets new lockdowns

A woman wearing a face mask walks on the ocean front while oil tankers are seen anchored off the coast of Long Beach, California, after sunset on April 25, 2020.
Apu Gomes | AFP | Getty Images

Oil rose on Tuesday as optimism from the roll-out of coronavirus vaccines balanced out tighter lockdowns in Europe and forecasts of a slower demand recovery.

The United States began vaccinating people on Monday as the country's COVID-19 death toll crossed the 300,000 mark. Britain and Canada have also begun to administer shots.

U.S. West Texas Intermediate (WTI) crude settled up 63 cents, or 1.34%, at $47.62. Brent crude was up 41 cents, or 0.8% at $50.70 a barrel.

Oil prices have recovered in the past few weeks, with Brent reaching $51.06 on Dec. 10, its highest since March, supported by hopes of a recovery in demand. Prices had dropped to historic lows in March as the pandemic took hold.

"Brent is continuing to defy all the negative news," said Carsten Fritsch, an analyst at Commerzbank. "More and more countries in Europe and states in the U.S. are tightening the corona restrictions over Christmas and the new year, which is likely to weigh on demand."

London stepped up pandemic restrictions requiring bars and restaurants to close, Italy is considering more stringent steps over Christmas and Germany is likely to be under lockdown until early 2021.

Forecasters are also trimming demand numbers. The International Energy Agency on Tuesday said that any impact of the vaccines on demand is several months away. OPEC on Monday had said oil demand will rise more slowly than expected.

"There is a growing agreement between forecasting agencies that the improvement in global oil demand might not start at the beginning of next year but in the second half," said Tamas Varga of oil broker PVM.

The latest snapshots of U.S. oil supplies are expected to show a mixed picture, with gasoline and distillate stocks rising and crude inventories falling.

The first of this week's two U.S. inventory reports, from the American Petroleum Institute, is due at 2130 GMT (4:30 p.m. EST).