Oil crept higher, with a demand increase from cold weather the latest addition to a rally that has pushed crude to a 10-month high.
Demand could get a boost of at least 1 million barrels a day, Goldman Sachs Group Inc said, as frigid temperatures in Asia and Europe sent other energy markets soaring. In Japan, power generators have been buying cargoes of low-sulfur fuel oil for the purpose of direct burning, according to traders.
The market outlook has already been tightening. Saudi Arabia trimmed February supplies to at least 11 refiners in Asia and Europe after announcing surprise production curbs last week. US inventories are also expected to decline in government data later, after the American Petroleum Institute reported a 5.82 million-barrel weekly drop in crude stocks.
Covid-19 vaccine breakthroughs and the recent Saudi pledge to deepen cuts have underpinned a meteoric rise for oil since the end of October, with prices up almost 50%.
While outbreaks of the coronavirus continue to fuel global consumption concerns, traders see demand returning in the longer term.
“We have a positive outlook,” Russell Hardy, chief executive officer of trading house Vitol Group, said in a Bloomberg Television interview. “The market as usual is racing ahead and factoring in that positive news of a vaccine and the expectation of a better summer and a better second half of 2021.”
West Texas Intermediate for February delivery advanced 0.7% to $53.58 a barrel at 8:52 am in New York.