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 lockdowns are cooling fuel consumption.
Brent crude futures for March rose 73 cents, or 1.3%, to $55.48 a barrel by 1454 GMT after slipping 35 cents in the previous session.
U.S. West Texas Intermediate crude rose 17 cents, or 0.3%, to $52.53. There was no settlement on Monday because U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.
A lower dollar also helped demand, making oil cheaper for holders of other currencies.
Investors are upbeat about demand in China, the world’s top crude oil importer, after data on Monday showed its refinery output rose 3% to a record high in 2020.
China also avoided an economic contraction last year.
Investors are watching for U.S. oil inventory data from the API industry association, due on Wednesday, the day of U.S. President-elect Joe Biden‘s inauguration.
“As we are approaching the beginning of the Biden administration era in the U.S., traders now have their hopes up for a rapid positive effect on markets coming from the promised ($1.9 trillion) stimulus package,” said Rystad’s head of oil markets, Bjornar Tonhaugen.
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.