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By Amrith Ramkumar 

A recent rise in oil prices continued Tuesday, putting crude on track for its highest close since early March with investors wagering on a brighter economic outlook and higher demand for fuel.

U.S. crude-oil futures for January delivery advanced 2.9% to $44.32 a barrel, rallying for the sixth time in seven sessions and eclipsing their peak closing level from late August. Oil started the year above $60, briefly tumbled below $0 for the first time ever in April as coronavirus shutdowns crippled demand, then rebounded around $40 this summer.

Prices had hovered around the $40 level for months, but upbeat coronavirus vaccine trial results in recent weeks are igniting fresh gains. The data from Moderna Inc. and the duos of Pfizer Inc. and BioNTech SE and AstraZeneca PLC and the University of Oxford are fueling hopes that global consumers will be vaccinated more quickly than previously expected and could resume traveling.

That would be a boon for energy producers like Chevron Corp. and Exxon Mobil Corp. because oil demand rises when more people are driving and flying and ships laden with goods are traveling all over the world. The pandemic fueled a historic drop in fuel demand early in the year and prompted a fresh selloff in late October, but traders now expect a recovery in consumption to extend the oil rebound into 2021.

"It's a total change of vibe," said Robert Yawger, director of the futures division at Mizuho Securities USA. "Everything is much more positive now."

In another sign analysts are more optimistic about future oil demand, U.S. crude futures that expire next summer now cost more than futures expiring later in 2021. That condition, known as backwardation, signals higher expected consumption and sends a bullish signal to investors who often have to sell contracts that expire sooner and buy longer-dated futures.

Brent crude, the global gauge of oil prices, added 2.5% to $47.21 a barrel Tuesday, also heading for its highest close since March.

With the demand outlook brightening, hedge funds and other speculative investors have lifted net bets on higher U.S. crude prices in recent weeks, Commodity Futures Trading Commission data show.

In addition to vaccine trial results, Wall Street analysts have also cheered Democratic nominee Joe Biden's recent victory in the U.S. presidential election. Many traders had feared a contested outcome or disruptions related to mail-in voting that would leave the result in doubt for weeks after election day and add to already elevated levels of economic uncertainty.

Some investors are also pleased with Mr. Biden's expected nomination of former Federal Reserve Chairwoman Janet Yellen to be the next Treasury Secretary. Analysts expect Ms. Yellen to advocate for more stimulus to support the economy as it recovers from the pandemic.

"The assumption is that she would work with [current Fed Chairman Jerome] Powell to get a supersized stimulus package" involving both fiscal and monetary support, Mr. Yawger said.

That optimism about the global economy is prompting gains in growth-sensitive assets across stocks, commodities and currencies.

With oil prices climbing, energy producers have been among the stock market's best performers in recent days. The S&P 500 energy sector is up more than 35% so far this month, with companies like Diamondback Energy Inc. and Occidental Petroleum Corp. paring some of their sizable 2020 declines. Some traders view the rebound in energy stocks as a bullish sign for the commodity market because shares of producers tend to be more extreme than oil prices, rising faster when crude climbs but losing value more quickly when oil drops.

Analysts are waiting to see whether the Organization of the Petroleum Exporting Countries and allies like Russia continue existing supply cuts following recent price gains. Earlier in the month, analysts had expected OPEC Plus might have to deepen production cuts to support falling oil prices amid a rise in coronavirus cases around the world.

If the cartel and its partners roll back supply curtailments or seem to be wavering on their support for the oil market, the recent rally could fade, traders caution. While many analysts are optimistic about the outlook for demand in 2021, there is also concern that recent restrictions in Europe to curb the pandemic and rising cases in the U.S. could lead to a short-term oversupply this winter.

Elsewhere in commodities Tuesday, most actively traded gold futures slid 2% to $1,800.50 a troy ounce, continuing a recent selloff with traders selling the haven metal amid optimism about the global economic outlook.

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

(END) Dow Jones Newswires

November 24, 2020 11:09 ET (16:09 GMT)

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