Third Vaccine Breakthrough Boosts Oil, Expectations High For Demand Recovery

by Ship & Bunker News Team
Monday November 23, 2020

A third major Covid vaccine breakthrough in as many weeks caused oil prices to once again rise on Monday, this time by over 2 percent, with traders now anticipating a meaningful demand recovery ahead.

Britain's AstraZeneca said on Monday its vaccine, developed with the University of Oxford, is up to 90 percent effective, helping Brent to settle up $1.10, or 2.45 percent, to $46.06 per barrel. West Texas Intermediate gained 64 cents to $43.06 per barrel, a 1.51 percent gain.

Today's optimism evidently outweighed any near-term concerns of spiking COVID cases and tightening lockdown measures, particularly in certain parts of Europe and North America.

Both benchmarks jumped 5 percent last week on the likelihood of the Pfizer and Moderna vaccines beginning deployment before year-end, and U.S. healthcare workers and other front line workers could start getting shots within a day or two of regulatory consent next month, said Dr. Moncef Slaoui, chief scientific adviser for “Operation Warp Speed.” 

John Kilduff, founding partner at Again Capital, said, “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.”

John Kemp, commodities analyst at Reuters, wrote on Monday that hedge funds "started to become more bullish on the outlook for oil last week" thanks to the vaccine news: they and other money managers purchased the equivalent of 69 million barrels in the six most important petroleum futures and options contracts in the week ending on November 17.

Kemp stated, "Portfolio managers have now purchased a total of 182 million barrels in the two most recent weeks, taking their total position in the six contracts to 539 million, the highest it has been since the start of September."

Also, the firming of the oil futures curve is a sign that the market expects a rapid tightening of supplies ahead, according to RBC; the move higher has reportedly been one of the largest in recent years.

Meanwhile, Barclays kept its “above consensus” 2021 oil price forecasts on Monday: its prediction of  Brent at $53 per barrel was based on output discipline by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, as well as the vaccines boosting demand in the second half.

It is said that OPEC+ is leaning towards postponing a planned January increase to oil output by at least three months.