Covid vaccine hopes lift oil prices surge to 8-month high

Andrew Cummings
November 24, 2020

Brent crude prices hit their highest levels since March as news of a third promising vaccine candidate spurred hopes of a quick recovery in oil demand, while U.S. President-elect Joe Biden received the go-ahead to begin his presidential transition.

USA energy firms cut the number of oil and natural gas rigs operating for the first time in 10 weeks even as producers return to the wellpad with crude prices mostly trading over $40 a barrel since mid June.

The global benchmark for oil prices, Brent Crude futures, were up 0.1% to $46.09 a barrel on Tuesday after closing 2% higher on the previous day and 5% in the previous week. As of writing, the WTI was up 1.2% on the day at $42.95.

Both the Brent and the WTI benchmarks gained 5% last week.

Prospects for effective COVID-19 vaccines have bolstered oil markets this week.

"Positive sentiment continues to be driven by the recent good news about the efficacy of coronavirus vaccines in development and the expectation that the OPEC+ meeting at the end of this month could see the group extend current cuts by 3-6 months", said Stephen Innes, Chief Global Markets Strategist at axi, a financial services firm.

After the price war in March, the Organization of the Petroleum Exporting Countries and allies led by Russian Federation, a group known as OPEC+, agreed to record high output cuts to support prices. Pfizer Inc said it will apply to USA health regulators on Friday for emergency use authoritization of its vaccine, the first such application in a major step toward providing protection against the new coronavirus.

AstraZeneca said on Monday its COVID-19 shot was 70% effective in trials and could be up to 90% effective, giving the fight against the pandemic a third vaccine.

On the supply front, OPEC+ will discuss its "output policy" during the ministers meet on 30 November and 1 December.

Uncertainties surrounding US post-election disputes also started clearing after President Donald Trump on Monday allowed officials to proceed with a transition to President-elect Joe Biden, giving his rival access to briefings and funding even as he vowed to persist with efforts to fight the election results.

It will look at options to extend their deal on output cuts by at least three months from January.

Other reports by iNewsToday