West Texas Intermediate and Brent crude both settled above $30 a barrel – their highest since March 11.
Oil prices on Monday jumped to their highest in over two months on positive early results on a potential coronavirus vaccine, optimism about a resumption in economic activity and signs that producers were following through on planned output reductions.
Brent futures for July delivery settled at $2.73, or 8.4 percent, to $35.23 a barrel by 3:47 EDT (19:47 GMT), while US West Texas Intermediate (WTI) crude rose $3.04, or 10.33 percent, to $32.47.
hose were the highest settles for Brent and WTI since March 11, just a few days after prices started to collapse following the failure of a production cut agreement between the Organization of the Petroleum Exporting Countries (OPEC) and Russia, a group known as OPEC+.
Early data on Moderna Inc’s COVID-19 vaccine, the first to be tested in the United States, showed that it produced protective antibodies in a small group of healthy volunteers, the company said on Monday.
“Oil is breaking out higher after a potential coronavirus vaccine showed positive results in a phase one trial and on reports that China’s crude demand is almost back towards pre-virus levels,” said Edward Moya, senior market analyst at OANDA in New York.
Last week, China said its daily crude oil throughput rebounded in April from a 15-month low in March as refiners cranked up operations to meet renewed fuel demand after lockdowns imposed to prevent the spread of the coronavirus outbreak were eased.
Moreover, summer weather is enticing much of the world to emerge from coronavirus lockdowns. Shops and restaurants were reopening in Italy on Monday, while other centres of the outbreak such as New York City and Spain will gradually lift restrictions.
“Optimism on the demand side of the oil equation has also helped prices climb further, with gasoline demand coming back as governments ease confinement measures. This will help. But the physical market is not completely ‘out of the woods’,” said Rystad Energy’s senior oil markets analyst Paola Rodriguez Masiu.
The rally in the June WTI contract, which will expire on Tuesday, suggested last month’s historic plunge to negative or -$40 a barrel would not be repeated.
July WTI was the more actively traded futures contract, with volumes in the second-month contract outpacing the front-month contract for several days now. The July contract was up about 6.6 percent to $31.48.
Oil prices were also supported by production cuts. OPEC+ has cut its oil exports sharply in the first half of May, companies that track the shipments said, suggesting a strong start in complying with a new production cut agreement.
OPEC+ agreed to cut supply by a record 9.7 million barrels per day from May 1. Saudi Arabia, the world’s top exporter, announced last week it would cut an additional one million barrels per day in June.
Kuwait and Saudi Arabia have agreed to halt oil production from the joint Al-Khafji field for one month, starting from June 1, Kuwait’s Al-Rai newspaper reported on Saturday.
Production is also falling in North America as US and Canadian energy firms slash investment in new oil and natural gas drilling and cut their overall rig counts to record lows.