(Bloomberg) --Oil extended gains from the highest settlement in almost 10 months after broader markets rallied and American crude stockpiles declined more than expected.

Futures in New York rose 0.5% to above $48 a barrel. Crude inventories dropped by 3.14 million barrels last week, more than the median estimate in a Bloomberg survey. Equity markets rallied and the dollar fell as optimism grew around a $900 billion U.S. spending package, while Europe expedited the rollout of a Covid-19 vaccine before Christmas.

Oil is up more than 30% since the end of October on optimism about a sustained recovery in demand as the world gets vaccinated, but the market is still facing a number of near-term hurdles including an OPEC+ supply hike next month. The International Energy Agency warned this week that the crude glut left behind by the pandemic won’t clear until the end of 2021.

“It is not only hopes that the stimulus package will be approved in the U.S. that are pushing prices up; U.S. inventory data have also lent positive impetus,” said Commerzbank AG analyst Barbara Lambrecht.

The physical market, meanwhile, is robust. India’s refineries are running at full tilt and Asian demand has driven the price of Russian, Middle Eastern and U.S. barrels higher. There are signs, however, of weakening consumption from some countries in the region including South Korea, as the coronavirus stages a comeback.

Prices:

West Texas Intermediate for January delivery rose 0.5% to $48.06 a barrel at 10:09 a.m. London time

Brent for February settlement gained 0.5% to $51.32

The mixed outlook has weakened the front of Brent’s forward curve, which is now on the verge of a bearish contango structure. The prompt timespread was still 3 cents a barrel in backwardation, meaning the first month was more expensive than later-dated ones. That compares with 13 cents a week earlier.

Other oil-market news:

Vessel owners and oil refiners were expected to face major upheaval because of rules that took effect on Jan. 1 to help improve human health and combat environmental concerns by slashing the amount of sulfur in ship fuel. The two industries did, indeed, undergo unprecedented turmoil -- but the cause was a pandemic that upended economies and trashed oil demand.

Iran condemned an attack on a tanker at a Saudi Arabian port as a threat to maritime security, in its first official comments on the assault against its regional rival.

Venezuela’s national oil company started unloading more than 1 million barrels of oil from a stricken tanker that had sparked fears of a major environmental disaster in the Caribbean.