Oil prices climbed on Tuesday as optimism that government stimulus will eventually lift global economic growth and oil demand trumped concerns that renewed Covid-19 pandemic lockdowns globally are cooling fuel consumption.
Brent crude futures for March rose $0.72 to $55.47 a barrel by 1152 GMT after slipping $0.35 in the previous session.
“There is perception that any retracement will be quick as confidence in economic and oil demand recovery is unlikely to fade away,” said PVM analysts in a note.
US West Texas Intermediate crude was at $52.65 a barrel, up $0.29. There was no settlement on Monday as US markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.
Investors are upbeat about demand in China, the world’s top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020. China also avoided an economic contraction last year.
Investors are watching out for US oil inventory data from industry association American Petroleum Institute (API), due on Wednesday, the same day US President-elect Biden’s inauguration speech will likely give details on the country’s $1.9 trillion aid package.
The International Energy Agency cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.
“Border closures, social distancing measures and shutdowns…will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.