Oil Achieves Weekly Gains Despite Covid Fears Outweighing Vaccine Hopes

The call mounts for OPEC to suspend its January output relaxation: File Image/PixaBay

Oil prices on Friday fell again due to rising output from Libya and the persistent fear of Covid infections, but Pfizer's vaccine breakthrough news earlier this week kept crude on track for substantial weekly gain.

On reports that Libyan oil production has risen to 1.2 million barrels per day (bpd) compared to 1 million bpd on November 7, Brent fell 75 cents to settle at $42.78 per barrel, and West Texas Intermediate fell 99 cents to $40.13 per barrel.

But for the week, both benchmarks achieved gains of over 8 percent as hope that the vaccine, which is reportedly over 90 percent effective against Covid, will soon be disseminated and is gradually steering some industry players away from bearish sentiment.

Harry Tchilinguirian, head of commodity research at BNP Paribas, weighed bad news against good news in assessing Friday's trading performance: "In essence, some of the feel-good factor from the Pfizer vaccine has worn off......however, OPEC+ is prepared to tweak its production and we're still waiting for the trial results of other vaccines that may be easier to distribute since they won't need such cold storage."

He was referring to the Organization of the Petroleum Exporting Countries and its allies indicating its willingness to halt January's planned loosening of output curbs, if market conditions warrant; of late, the cartel has earned kudos for its integrity, with sources noting that member compliance with regards to the cuts was 101 percent in October.

In keeping with some second-guessing about the immediate beneficial impact a Covid vaccine will have on the energy market (triggered by the International Energy Agency earlier this week warning that the market won't be revived quickly), Julian Lee, oil strategist at Bloomberg, worried on Friday that "Short-term headwinds for oil demand continue to outweigh any positive signals from the vaccine test results, with oil producers left facing a difficult few months until the middle of next year and an uncertain recovery after that."

Ignoring the fact that forecasts for the crude market are frequently wrong, Lee concluded that "The latest outlooks from the world's big three forecasting agencies make it very probable that [OPEC] will have to extend the current level of cuts when they meet in less than three weeks' time."