Vaccines Again Credited For Oil Price Gains, Canadian Energy Revival

Meanwhile, Bernstein predicts a huge rebound for energy earnings in 2021: File Image/Pixabay

Oil prices on Thursday achieved a nine month high thanks to record refining demand in India and China as well as optimism that Washington will soon ratify a second fiscal stimulus deal to offset an economy ravaged by government-imposed Covid lockdowns.

Phil Flynn, senior market analyst at Price Futures Inc., summarized the mood among his colleagues by stating, “Looking at what we’re seeing in Asia is raising expectations that in the New Year we will see a rapid increase in crude oil demand, as the [Covid] vaccine rolls out in the U.S.”

Bjornar Tonhaugen, an analyst at Rystad Energy, agreed, but added a caveat: “It seems to be a much better festive season than most bullish traders could expect for, but whether oil prices can remain as high and keep these gains is still questionable amid the demand destruction lockdowns are causing.”

Brent on Thursday settled up 42 cents at $51.50 per barrel, while West Texas Intermediate rose by 54 cents to $48.36 per barrel; both benchmarks hit their highest since early March.

Reuters noted that shares of North American oil and gas producers are climbing sharply due to expectations that the vaccines will revive fuel demand, especially in the airline sector; Jean-Louis Le Mee, head of hedge fund Westbeck Capital Management, said, “Some stocks still have the potential to double next year in our view, even after the sharp rebound of the last five weeks.”

Additionally, Canadian Natural Resources, Suncor Energy, and Imperial Oil - three of Canada’s top producers - have forecast higher output next year and bumped up their budgets; also, Canadian oil mergers and acquisitions have topped $17 billion in 2020, outstripping $15.5 billion achieved in 2019, according to Refinitiv.

Still, the effect of the lockdowns continue to be felt, and data on Thursday showed that although restrictions have eased somewhat in Saudi Arabia, the kingdom's economy shrank 4.6 percent in the third quarter, rebounding slightly from the 7 percent slump in the previous quarter but marked by declines in the oil and non-oil sectors.

However, Saudis expect a resumption of growth next year, on the order of 3.2 percent.

Meanwhile, Richard Bernstein, CEO and CIO of Richard Bernstein Advisors, chided investors who en masse are gravitating towards technology: he told CNBC, “The whole innovation disruption thing is becoming a sucker’s bet: fundamentals are improving dramatically as you look towards 2021, and it’s like nobody cares.”

Bernstein compared the tech rally to the dot-com bubble and remarked, “One of the big stories for 2021 is going to be a huge rebound in earnings: we’re coming off a pandemic-depressed base.

“Right now, the sector with the highest earnings growth projections by analysts for 2021 is the energy sector; nothing is even close.”