Oil traded at its highest level since March as markets broadly rallied on the start of the U.S. presidential transition process and with the demand outlook strengthening after a string of positive vaccine breakthroughs. Brent futures rose as much as 1.4% in London, accompanied by a sharp rally in the shape of the futures curve as physical markets in Asia showed signs of strength. The triggering of a formal transition process to U.S. President-elect Joe Biden buoyed stock markets and pushed down the dollar on Tuesday.
Such is the strength of the recovery in Asia, it’s now pulling supplies from as far afield as the North Sea. A rebound in Chinese local flights is also aiding demand for jet fuel, the hardest-hit oil product. That broad recovery has helped drive the market’s return to backwardation, which is significant as it often attracts passive flows into the market, leading to further price rallies.
“There are a growing number of unequivocal signs that the developing positive confidence will keep growing,” said PVM Oil Associates analyst Tamas Varga. “The improvement in Brent spreads is also down to healthy demand from the Far East.”
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