0250 GMT: Crude oil futures surged during mid-morning trade in Asia Feb. 8, as strong demand from China continued to lift sentiment, while stimulus expectations provided some tailwind to the market.
At 10:50 am Singapore time (0250 GMT), the ICE Brent April contract was up 53 cents/b (0.89%) from the Feb. 5 settle to 59.87/b, while the March NYMEX light sweet crude contract was up 55 cents/b (0.97%) to $57.40/b. Both markers had risen 5.31% and 6.16% in the week ended Feb. 5 to settle at one-year highs of $59.34/b, and $56.85/b, respectively.
Fears that Chinese oil demand would take a hit following fresh outbreaks of the coronavirus were quelled after infection numbers subsided, and as the number of oil vessels heading towards the country remained high.
"Crude oil rose to its highest level in a year on signs of strong demand in China. The number of vessels sailing toward China hit a six-month high of 127 on Friday, equivalent to approximately 250 million barrels," ANZ analysts said in a Feb. 8 note. "This comes as stockpiles in China continue to fall."
The oil market also received a boost from hopes that a sizeable US stimulus package is not far-off, after the Senate, on Feb. 5, approved a fast-track budget measure that could allow the package to be passed despite Republican resistance. The House of Representatives later in the day also gave its approval to the measure.
"Oil is trading higher at the Asia open [after] getting a kick start from the US stimulus effect and a slightly weaker dollar," Stephen Innes, chief global market strategist at Axi, said in a Feb. 8 note.
Analysts also said that a decline in coronavirus infections in key economies such as the US and the UK amid rapid vaccine roll-outs have brightened the demand outlook for oil, stoking bullish sentiment especially since supply is expected to remain tight following Saudi Arabia's 1 million b/d output cut.
"With vaccines rolling out faster than energy markets predicted, oil traders feel comfortable adding length at current prices, even more so with [Chinese] demand holding up despite higher physical market prices," Innes said.
Nevertheless, concerns on the pandemic front continue to fester, as some countries, including Germany, are likely to extend their lockdowns till at least the end of February.
News reports that the Oxford-Astrazeneca is ineffective in preventing mild to moderate COVID-19 caused by the South African strain of the coronavirus have cause some consternation in the market as well.
