Fast-Track Covid Vaccinations Cause Oil To Break $50 Threshold As Bull Market Begins

by Ship & Bunker News Team
Thursday December 10, 2020

The long awaited commencement in several countries of Covid vaccinations, which represents the beginning of the end for the pandemic and government restrictions that caused worldwide economic havoc, inspired crude traders on Thursday to propel oil prices to their highest levels since March.

With the U.S. expected to start inoculations this weekend along with Canada next week and the United Kingdom having already begun, Brent rose $1.39 to settle at $50.25 per barrel; West Texas Intermediate rose $1.26 to settle at $46.78 per barrel.

For once, traders shrugged off Wednesday's disclosure of a 15.2 million barrel rise in U.S. crude stocks, and Bjornar Tonhaugen, head of oil markets at Rystad Energy, said, "It is not every day that the market ignores weekly builds of U.S. crude inventories; fast-tracking vaccinations is raising hopes that oil demand will benefit quicker and the North American markets are major consumers."

Bart Melek, the head of global commodity strategy at TD Securities, professed to be surprised by oil breaking the $50 barrier so quickly: "I have been advocating $50+ Brent, but I thought that would happen after we see inventories and demand look better."

Despite the huge build in U.S. inventories, RBC Capital Markets analysts were bullish about a radical improvement in supply and demand dynamics compared to earlier this year: "The distinct FOMO-type shift in financial market sentiment is supported by a global physical market that is absorbing barrels at a more robust-than-consensus pace.

"Asia refinery runs remain firm, global floating storage levels are being dismantled at a vigorous pace, and European mobility is accelerating amid loosening regional lockdowns."

More good news on Thursday came from the U.K., which has emerged from a second lockdown and reported a jump in road fuel sales last week by almost 10 percent.

Equally beneficial to oil is Wall Street regaining its appetite for risk: Bloomberg on Thursday noted that copper, long seen as a bellwether for the global economy, is surging; plus, extreme weather and strong demand from China is driving up crop prices around the world.

This correlates with Goldman Sachs stating last month that recent gains are just the start of a "much longer structural bull market" in commodities.