By Laura Sanicola
NEW YORK (Reuters) - Oil prices settled up more than 2% on Monday, extending last week's gains as the latest report of encouraging coronavirus vaccine trials had traders anticipating a recovery in demand.
Brent crude settled up $1.10, or 2.45 % to $46.06 a barrel while U.S. West Texas Intermediate crude gained 64 cents to $43.06 a barrel, a 1.51% gain. Both benchmarks jumped 5% last week.
British drugmaker AstraZeneca said on Monday its vaccine, developed along with the University of Oxford, could be around 90% effective.
"Another dose of favorable coronavirus vaccine news today has prompted a renewed upswing in the equities that has easily spilled into the oil space," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
The contango structure in the market, whereby the prices of front-month delivery contracts are lower than those for delivery six months later, narrowed to as little as 31 U.S. cents, its smallest since mid June, reflecting traders' views a sustained glut is receding.
Outlook for demand has improved with news indicating progress towards developing COVID-19 vaccines. A U.S. official said the first inoculations in the United States could start a day or two after regulatory approval was secured.
"The oil complex is benefiting from vaccine news and preliminary data is showing some decent jet fuel demand for the first time since this whole pandemic started," said John Kilduff, partner at Again Capital LLC in New York.
Sentiment was also bolstered by expectations that the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers, a group known as OPEC+, would extend a deal to restrain output.
On the supply side, OPEC+, which meets on Nov. 30 and Dec. 1., will look at options to extend its deal on output cuts by at least three months from January.
Smaller Russian oil companies are still planning to pump more crude this year, a group representing the producers said.
(Additional reporting by Shadia Nasralla in London, Jessica Jaganathan in Singapore; Editing by Edmund Blair, Barbara Lewis and David Gregorio)