Oil climbed to the highest level since early March in London as indications of an economic recovery from the coronavirus pandemic helped drive a rally in commodities. Both Brent and West Texas Intermediate crude futures jumped more than 2% on Tuesday. European Union leaders agreed on an unprecedented stimulus package to pull their economies out of the worst recession in memory. At the same time, European regulators are eyeing a potential approval of the first Covid-19 vaccine this year, further adding to the positive sentiment.
On the supply side, analysts are expecting U.S. inventories to tighten. Crude stockpiles probably fell for the third time in four weeks, a Bloomberg survey showed. The “truly historic stimulus from the European Union governing body” is a “big positive for the oil market,” said John Kilduff, a partner at Again Capital LLC. “That’s going to be very supportive of their economies and should translate into a better economic outlook and better fuel demand.” ,Brent futures climbed toward $45 a barrel for the first time since early March when a meeting between OPEC and its allies broke down acrimoniously and the alliance began a short-lived price war. Since then, prices have recovered but remain range-bound as worldwide virus cases approach 15 million and various U.S. states mull reimposing lockdown measures.
“The idea that things are going to continue to recover, demand is going to push back to pre-pandemic levels and there’s going to be enough supply off the market to keep tightening the picture, is where the buying is coming from,” said Gene McGillian, vice president of market research at Tradition Energy.