Oil holds gains near 12-week high on US vaccination optimism
Oil held gains near the highest level since early September in Asian trading as signs that Covid-19 vaccinations in the US could be underway within three weeks improved the demand outlook.
Futures in New York traded near $42 a barrel after capping their third straight weekly gain. Vaccinations will “hopefully" start as soon as December 11 or December 12, Moncef Slaoui, head of the American government’s Operation Warp Speed vaccine acceleration program, said on CNN on Sunday.
Crude has jumped almost 20% in November as pharmaceutical companies made rapid progress on readying anti-virus drugs. Pfizer Inc. and BioNTech SE requested emergency authorization for their vaccine on Friday and Moderna Inc. released positive interim results from a final-stage trial and said it’s close to seeking emergency authorization.
Optimism that relief from the pandemic is in sight has seen the market look past surging infections and more lockdown measures. The U.S. is now averaging almost 110,000 more daily cases than a month ago, while the opening of a Hong Kong-Singapore travel bubble has been delayed by two weeks due to an uptick in cases in the Chinese territory.
“We may see a continuing flurry of progress milestones on the vaccine front but it will be a tug of war with a likely worsening of the Covid situation in Europe and North America," said Vandana Hari, founder of consultancy Vanda Insights in Singapore. “The vaccines aren’t going to be able to prevent those waves."
Expectations that OPEC+ will agree to delay plans to add an extra 2 million barrels per day of output from January have also buoyed crude in recent weeks. The alliance will make a decision at a meeting at the end of the month.
The market optimism is being reflected in futures curves. Timespreads for WTI and Brent are moving closer to backwardation -- where near-term contracts are more expensive than later-dated ones -- an indication that concerns over a glut have eased. Brent’s prompt timespread was 9 cents a barrel in contango on Monday, compared with 48 cents at the end of October.