Oil prices have inched higher as hopes of an effective vaccine for Covid-19 continued to enhance market sentiment.

Data released by industry group the American Petroleum Institute (API) showed an unexpected fall in the US crude stocks, contributing to today’s prices.

Brent crude futures rose by $1.17 to reach $44.78 a barrel, while US West Texas Intermediate (WTI) futures were increased by $1.17 and stood at $42.53, Reuters reported.

UBS oil analyst Giovanni Staunovo was quoted by the news agency as stating: “This week’s news about a coronavirus vaccine was encouraging and, alongside short-covering activity, strongly supported oil prices on Monday and Tuesday.”

However, the bank warned that European lockdowns and restored Libyan oil output ‘could weigh on prices’ in the near term.

According to API data, the US crude stocks fell by 5.1 million barrels last week to about 482 million barrels.

Both the Brent and the US crude benchmarks were up by 13% this week, supported by an announcement from drug manufacturers Pfizer and BioNTech that an experimental Covid-19 treatment was almost 90% effective based on results of the initial trial.

Despite oil prices being encouraged by the vaccine news, the overall outlook for fuel demand ‘remains clouded’ as coronavirus-related restrictions are being renewed in Europe and the US.

PVM broker Stephen Brennock stated: “Hopes of a return to pre-Covid normalcy next year have been given a huge boost this week. Before then, however, a difficult winter is on the cards. Infection rates are still accelerating in several parts of the world including the US.”