Brent crude prices topped $50 a barrel for the first time since early March on Thursday, the latest milestone in a remarkable oil-market recovery fueled by supply curtailments and drivers returning to the road.
The global gauge of oil prices advanced 4.1% to $50.88 a barrel, continuing a monthslong rebound from its April lows around $19 during global economic shutdowns. While Brent started the year above $65, its recent rally shows how hopes for coronavirus-vaccine distribution and economic-stimulus programs are helping to heal global energy markets.
Oil has risen in tandem with stocks and other commodities in recent weeks, part of a broad market rally fueled by investors’ anticipation for a 2021 global economic resurgence. Buoyant demand from China also is boosting oil prices after the world’s largest commodity consumer largely contained the pandemic.
Traders are now hoping that travel picks up in the U.S. and Europe next year, boosting energy consumption while large suppliers in the Organization of the Petroleum Exporting Countries remain disciplined with production cuts.
OPEC and allies including Russia agreed to modest output increases last week, instilling faith that the group won’t bring back supply too quickly and adding momentum to the oil-price rally. Recent gains come despite a recent surge in coronavirus cases around the world and data showing a drop-off in U.S. fuel demand, showing how investors are looking past those concerns and instead focusing on vaccine hopes.
“It’s been that inflection point that turned everything,” said
Rebecca Babin,
senior energy trader at CIBC Private Wealth Management. Upbeat vaccine trial results are pushing traders to buy when prices fall, a reversal from earlier in the year, she said.
U.S. crude futures added 4.5% to $47.55 a barrel Thursday, also extending their recent advance.
The gains are a boon for beleaguered energy producers who have been among the sectors hardest hit by the coronavirus and been forced to slash jobs and drilling activity. The S&P 500 energy sector advanced more than 2.5% Wednesday, lifted by companies including
Exxon Mobil Corp.
and
Chevron Corp.
Even with a 36% rally since the end of September, the sector is still down more than 30% in 2020.
With U.S. stocks at records and bond yields near all-time lows, some investors are increasing their exposure to commodities and shares of producers, which remain well below recent peaks. Hedge funds and other speculative investors have lifted net bets on higher U.S. crude prices in four consecutive weeks through Dec. 1, Commodity Futures Trading Commission data show, signaling more optimism filtering through the market.
Many analysts remain wary of more volatility ahead, particularly after recent data indicating an uptick in U.S. gasoline consumption is fading. Government data released Wednesday showed a big rise in U.S. inventories as gasoline demand crumbled to its lowest level since May last week, the latest figure showing that the domestic economic recovery is slowing.
Yet oil still surged on Thursday, the latest sign that rosy demand figures from Asian consumers are offsetting weakness in other parts of the world.
“That demand is just better than we thought it would be,” Ms. Babin said.
Write to Amrith Ramkumar at amrith.ramkumar@wsj.com
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