Oil prices up on virus vaccine hopes, EU stimulus deal

NEW YORK (Reuters) - Oil prices rose about $1 a barrel on Tuesday, hitting the highest level in more than four months with a boost from a European Union stimulus deal and hopeful news about coronavirus vaccine trials.

FILE PHOTO: A TORC Oil & Gas pump jack is seen near Granum, Alberta, Canada May 6, 2020. Picture taken May 6, 2020. REUTERS/Todd Korol/File Photo

Brent crude futures settled at $44.32 barrel, rising $1.04, or 2.4%. West Texas Intermediate (WTI) settled at $41.96 a barrel, gaining $1.15, or 2.8%.

Prices pared gains in post-settlement trade after the American Petroleum Institute, an industry group, reported U.S. crude inventories grew last week by 7.5 million barrels compared with expectations for a draw of 2.1 million barrels. [EIA/S]

Oil was buoyed by an agreement among European Union leaders on a 750 billion-euro ($859 billion) fund to prop up coronavirus-hit economies.

The EU deal allows the European Commission to raise billions of euros on capital markets on behalf of all 27 states, an unprecedented act of solidarity in almost seven decades of European integration.

World shares and the euro also hit their highest levels in several months. The dollar, in which most oil contracts are priced, fell to its lowest since March against a basket of currencies. [MKTS/GLOB]

Oil prices were supported by promising coronavirus vaccine data released on Monday, though a vaccine remained months away at best. Several companies are testing new drugs for immunity to COVID-19.

Oil prices also drew support from expectations that U.S. lawmakers could soon agree on a new stimulus package, as extended unemployment aid for millions of Americans will expire at month-end.

“Apparent progress on the U.S. stimulus deal, the EU recovery agreement and progress toward a successful vaccine have all merged this week to kick up demand for risky assets,” said Jim Ritterbusch of Ritterbusch and Associates.

Countries including the United States and India are reporting record numbers of coronavirus infections and others such as Spain and Australia are battling new outbreaks.

Reporting by Laila Kearney in New York; Additional reporting by Shadia Nasralla in London and Aaron Sheldrick in Tokyo; Editing by Marguerita Choy and Matthew Lewis