Oil prices climbed further on Tuesday following Pfizer’s announcement that trials have shown that its candidate vaccine is effective in 90% of cases. This is good news for oil and the world economy as second-wave coronavirus infections rise in the United States and Europe and many major economies are entering a new phase of lockdowns.
Brent crude futures lifted by 9 cents or 0.2% to $42.49 a barrel by 09:05 West Africa Time just as U.S. West Texas Intermediate (WTI) crude futures rose 16 cents or 0.4% to $40.45 a barrel. Bonny Light, Nigeria’s banner oil grade, jumped $2.73 or 6.94% to $42.09 a barrel on Monday
Benchmark Brent and WTI advanced by as much as 8% on Monday, with gains hitting their highs in more than five months following the Monday update from Pfizer and its partner, BioNTech.
It is probable that large-scale deployment of the vaccine will be made in the months ahead once the regulatory go-ahead is received.
Also Read: Goldman Sachs Slashes 2021 Oil Forecast Due to Pandemic Resurgence
“A viable vaccine is unequivocally game-changing for oil – a market where half of the demand comes from moving people and things around,” said JP Morgan in a note seen by Reuters. “But as we have written previously, oil is a spot asset that must first clear current supply and demand imbalances before one-to-two-year out prices can rise.”
Lockdowns across Europe could trim an additional 1 million barrels per day from oil demand come year-end, according to Rystad Energy.
“The fast-tracking of multiple vaccines doesn’t mitigate the risk that many U.S. states will have to return to some form of lockdown this autumn/winter,” Bjornar Tonhaugen, the oil markets head at the oil and gas intelligence firm said. The United States oil stockpile numbers are set for release on Wednesday from the Energy Information Administration.
Also Read: Second Wave Coronavirus Lockdowns: Major Oil Producers Want Output Cuts Extended Into 2021
The Organisation of the Petroleum Exporting Countries (OPEC) and its Russia-led allies, a grouping called OPEC+, consented to an output cut by 7.7 million barrels per day (bpd) from August through December with a plan to relax the reduction from January 2021.
“If the oil market continues to rally between now and the OPEC+ meeting at the end of the month, it could prove self-defeating, as some members may grow more reluctant to roll over current cuts into next year, leaving the market vulnerable over the first quarter of next year,” ING economists said in a note.
