At the same time, the overall price structure has strengthened with a sharp narrowing of the spreads between monthly contracts, signaling that fears of oversupply are abating.

“There’s optimism now that there’s light at the end of the tunnel,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA. “Expectations around the path to economic recovery, and a recovery in oil demand, have changed and oil prices are reflecting that.”

The discount on front-month Brent versus contracts three months out has shrunk to 75 cents, the smallest gap — known as “contango” — since July. In U.S. markets, the spread between June and December 2021 has narrowed to 34 cents from $1.34 at the start of the month.

The American Petroleum Institute reported crude inventories dropped by 5.15 million barrels last week, with gasoline and diesel also decreasing, according to people familiar with the data. Official government figures are due Thursday. The median estimate in a Bloomberg survey forecast a 1.9 million-barrel decline in crude stockpiles.

There are reasons to be wary of the latest price surge, however.

Covid-19 infections have surged in Europe and the U.S., with Italy reporting the most fatalities since April and American cities including San Francisco announcing new restrictions. Early findings on a vaccine showed it protected most people from Covid-19, but it’s likely to take some time to roll out if it proves effective.

“The giddy risk-on trade of the past couple of days is pricing in future hope, but not the immediate practicalities and realities of a worsening virus surge on both sides of the Atlantic,” said Vandana Hari, founder of Vanda Insights in Singapore.

BMO Capital Markets also said it is “too soon” for $50 oil as the market contends with rising Libyan output. The OPEC member has boosted oil production to more than 1 million barrels a day, a milestone for the North African country after civil war all but shut its energy industry earlier this year.

The next major event for the market is the OPEC+ meeting at the end of the month, with Vitol Group predicting a major draw on excess global inventories if the alliance delays a planned easing of cuts.