Crude oil jumped by almost 10 per cent on Monday for its biggest daily gain in almost six months after news of a highly effective Pfizer vaccine against COVID-19 and Saudi Arabia's assurance that an OPEC+ oil output deal could be adjusted to balance the market.
Brent crude rose $3.41, or 8.6 per cent, to $42.86 a barrel by 1302 GMT (6:32 pm in India) while US West Texas Intermediate crude was up $3.57, or 9.6 per cent, at $40.71.
"Asset prices move faster than the real economy, and oil and other risk assets are reacting positively today to the Pfizer vaccine news," said BNP Paribas analyst Harry Tchilinguirian.
Pfizer said its experimental vaccine was more than 90 per cent effective in preventing COVID-19, based on initial data from a large study.
Saudi Arabia's Energy Minister Prince Abdulaziz bin Salman said the OPEC+ deal on oil output cuts could be adjusted if there is consensus among members of the group.
The Saudi minister was commenting after being asked whether OPEC+ - which groups OPEC states, Russia and other producers - would stick to existing cuts of 7.7 million barrels per day (bpd) rather than easing them to 5.7 million bpd from January.
Key members of the Organization of the Petroleum Exporting Countries (OPEC) are wary of US President-elect Joe Biden relaxing measures on Iran and Venezuela, which could mean an increase in oil production that would make it harder to balance supply with demand.
"While a Biden presidency increases the likelihood of Iranian oil supply returning to the market, this is not something that will happen overnight, and we still believe it's more likely an end of 2021-2022 event," ING said in a note.
Oil prices also found support from a weaker US dollar on the back of Mr Biden's US election victory, said UBS oil analyst Giovanni Staunovo.
The dollar weakened on Monday, hitting a 10-week low and boosting dollar-priced commodities that become more affordable for buyers outside the United States.
China, the world's top crude importer, reported October imports down 12 per cent from September.
However, renewed European lockdown measures to contain rising COVID-19 cases still appear set to push the outlook for global oil demand toward the downside, an International Energy Agency (IEA) official said.
"Major parts of the European continent are in lockdown. This would surely work toward the negative side," said Keisuke Sadamori, IEA director for energy markets and security.