There is growing confidence that oil prices will recover in the next two years as the market trends back up after dipping late last week on rising COVID 19 cases.

Prices had significantly surgedearly last week on promising vaccine news with pharmaceutical giant Pfizer announcing that its vaccine had achieved a 90 per cent efficacy rate.

The US-focused West Texas Intermediate is currently up 1 per cent to $US40.52 ($55.55) per barrel while the broader Brent crude benchmark is also up 1 per cent to $US43.06 per barrel.

However, FX Empire quoted Vitol chief executive Russel Hardy as saying that demand is not expected to increase significantly in the (northern) winter of 2020-21.

He added that a COVID vaccine would not have a real impact on the market before the end of 2021.

This is backed up by industry observers Energy Intelligence, Platts and Argus who noted that oil prices are expected to remain in the high $US30s to mid $US40s per barrel range in 2021.

They added in a panel at the 2020 ADNOC Trading Forum that things looked more optimistic in 2022 though this improvement is subject to COVID constraints and the resilience of the market to possible setbacks.

Crude inventories normalising

US petroleum inventories are also normalising with crude and petroleum stocks outside the strategic reserve falling by 11 million barrels for the week ending November 6, according to the Energy Information Administration.

Commercial inventories have fallen in 15 of the last 16 weeks, which Reuters noted was a sign that the oil market is under-supplied thanks to production cuts by OPEC+.

However, commercial crude stocks are 7 per cent, or 31 million barrels, above the five-year average and would only return to this level in February 2021 at current rates of inventory drawdown.

This could push OPEC+ to defer any output increases from the beginning of next year to April or July to allow inventories to normalise first.