Oil futures headed sharply higher on Tuesday, pushing the U.S. and global contracts to around the highest levels since February as markets grow more positive about the world’s ability to address the COVID-19 pandemic which has crushed demand for crude and its byproducts.
A historic stimulus package forged by the 27-nation European Union after marathon negotiations since Friday, helped to set the stage for a climb higher for oil. Investors also may also becoming more assured that countrys can beat back a surge in COVID-19 cases. Investors cheered the positive results from at least two experimental COVID-19 vaccines Monday.
“Crude prices are surging after both EU leaders wrapped up a landmark rescue fund and as the US seems to be getting a handle of the coronavirus spread,” wrote Edward Moya, senior market analyst at Oanda, in a daily research note on Tuesday.
The EU agreed a €750 billion ($860 billion) coronavirus rescue fund, and investors also are watching for developments with additional fiscal stimulus measures from the U.S., which could help curtail the recession that has been wrought by the pandemic.
Against that backdrop, West Texas Intermediate crude for September delivery on the New York Mercantile Exchange rose $1.28, or 3.1%, at $42.20 a barrel, after gaining 0.5% on Monday. If gains hold, the U.S. benchmark would close at around its highest level since late February, according to FactSet data.
There was only a few cents difference between the August contract, up $1.25, or 3%, at $42.17 a barrel, which expires at the end of Tuesday’s trading session and September’s.
September Brent crude on ICE Futures Europe, climbed by $1.34, or 3.1%, at $44.64 a barrel, after the global benchmark rose 0.3% in the previous session. Brent’s Tuesday gain is pushing that grade oil to its highest levels since early March.
“Oil is tentatively breaking out of its tight trading range, but still seems to lack a strong enough catalyst for WTI crude to break above the $45 level,” wrote Moya.
On Monday, crude scored an injection of fresh optimism on the back of reports on progress toward vaccine candidates for coronavirus being developed by the University of Oxford and as well as those in the works from the likes of Pfizer.
The global tally for confirmed cases of the coronavirus that causes COVID-19 climbed to 14.7 million on Tuesday, according to data aggregated by Johns Hopkins University, and the death toll rose to 610,292.