Vaccine Victory Again Boosts Oil, But Kemp Warns About Delayed Impact

The analyst says the economy won't fully benefit from the vaccine until later in 2021: File Image/PixaBay

Tuesday saw continued optimism among crude traders for the previous session's news that Pfizer's Covid vaccine is over 90 percent effective - and despite renewed lockdowns in Europe and rising infection rates in North America, oil prices enjoyed another substantial gain, this time of nearly 3 percent.

Brent on Tuesday settled up $1.21, or 2.9 percent, at $43.61 per barrel, while West Texas Intermediate gained $1.07, or 2.7 percent, to $41.36.

Oil was said to be further supported after the director of the U.S. National Institute of Allergy and Infectious Diseases, Anthony Fauci, said doses of the vaccine will be available for people at the highest priority in December.

Bob Yawger, director of energy futures at Mizuho, remarked, “This implies that at some point in next year, people may be able to go on vacation, which means we will see a greater demand for jet fuel.

“For the energy complex this is the best thing since sliced bread.”

John Kemp, commodities analyst for Reuters, was more cautious in his assessment of the vaccine's benefit to demand: he wrote on Tuesday that the first significant impact will not be felt until well into the second half of 2021, based on the logistics of inoculating large populations.

In the meantime, Kemp noted that it is up to the Organization of the Petroleum Exporting Countries (OPEC) to compensate for any reductions in demand, by reducing output.

The vaccine breakthrough comes as the first impact of the government imposed European lockdowns are starting to be felt: according to data from TomTom, traffic in London, Paris, and Madrid fell sharply in November after a peak in October.

It also comes when oil companies and entire economies continue the struggle to prevail, a case of the latter being cash-strapped Oman, which on Tuesday was said to be seeking to raise money by leveraging its biggest oil block: the sultanate plans to transfer its 60 percent stake in Block 6, which has a production capacity of 650,000 barrels per day, from Petroleum Development Oman to a new company.

The company would then tap international financial markets, allowing Oman to raise debt without putting it on the government’s books.