Oil kept rising after closing at a eight-month high on increasing optimism that recent Covid-19 vaccine breakthroughs will lead to a swift recovery in global energy demand next year.
Futures in New York climbed around 1% to trade above $45 a barrel as a broader financial markets rally continued. Global benchmark Brent crude could reach $60 a barrel by the summer of 2021 as the easing of travel restrictions boosts demand for fossil fuels, according to Bank of America.
In another positive sign for consumption, Premier Li Keqiang said China, the world's biggest oil importer, will likely return to a more "proper" range of economic development in 2021. China and Japan also agreed to restart some two-way travel by the end of November. Crude surged 4.3% on Tuesday after the triggering of a formal transition process to US President-elect Joe Biden.
Oil's value has increased by more than a quarter this month amid positive results for three Covid-19 vaccines. It's reclaimed heights not seen since the pandemic devastated global demand in March even as a resurgent virus prompted more lockdown measures. Expectations that OPEC and its allies will delay an increase in production planned for January have also aided the rally.
The investor mood has been lifted by the developments around vaccines and the likely extension of the OPEC+ output cuts, said Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group. "The market is fairly well-priced and should continue gains in the coming days."
Goldman Sachs said in a note that it expects OPEC+ to delay its planned 2 million barrel a day output ramp-up by three months. It forecast Brent would average $47 a barrel next quarter if this happens.
The optimism is reshaping oil's forward curves. Brent's prompt timespread and the so-called WTI red spread - which measures futures for December of next year to December 2022 - have both flipped to backwardation this week, a bullish signal that suggests the market may be moving into deficit.
Chinese and Indian refiners have issued a flurry of tenders seeking oil, adding more froth to the market. Rongsheng Petro Chemical is seeking spot crude supplies for delivery to Zhoushan and is also looking for term supplies for next year, while Indian Oil Corp. is seeking Middle Eastern and West African oil for December and January loading.
The American Petroleum Institute, meanwhile, reported crude inventories swelled by 3.8 million barrels, according to people familiar with the data. That would be the third straight week of rising stockpiles if confirmed by government figures due later on Wednesday. Inventories probably rose by 225 000 barrels last week, according to the median estimate in a Bloomberg survey before the official Energy Information Administration data.