Home > Auto > News > Oil set for third straight weekly gain after Covid-19 vaccine optimism

Oil is poised for a third weekly gain with positive Covid-19 vaccine developments paving the way for a more sustained recovery in oil demand.

Futures are up 4% this week in New York with Pfizer Inc. and BioNTech SE planning to request emergency authorization of their Covid vaccine later Friday. Moderna Inc. has also released positive interim results from a final-stage trial and has said it’s close to seeking emergency authorization.

Despite a strong week, prices traded little changed Friday as investors assessed the impact of a dispute between the White House and the Federal Reserve over emergency lending programs.

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“All the incremental vaccine updates are good news for 2021," but in the meantime, “the virus spread is just going to get worse," said Edward Moya, a senior market analyst at Oanda Corp. “We don’t have the two most important working arms of the government working together and this is going to weigh on risk appetite."

Even with vaccines on the horizon, a recovery in oil demand faces obstacles with governments under pressure to tighten restrictions and curb the spread of the virus. Americans are being urged not to travel for Thanksgiving, and European road use is once again depressed because of lockdowns.

Pipelines run to Enbridge Inc.'s crude oil storage tanks at their tank farm in Cushing, Oklahoma.
Pipelines run to Enbridge Inc.'s crude oil storage tanks at their tank farm in Cushing, Oklahoma. (Nick Oxford)

The recent climb in headline prices has been accompanied by significant moves in timespreads, where traders bet on the price of oil in different months. The spread between West Texas Intermediate for December 2021 delivery and the following month moved to backwardation before easing, while the closely watched gap between December 2021 and 2022 WTI contracts is close to also flipping.

“The oil market continues to hold up well with optimism generated with the progress of Covid-19 vaccines," said Harry Tchilinguirian, head of commodity-markets strategy at BNP Paribas SA. “At the same time, we should also be getting the results from AstraZeneca and the University of Oxford soon, and if similar to those of Pfizer and Moderna, this means that the light at the end of the tunnel is going to burn a little brighter and risk assets like oil can continue to ascend."

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Pfizer and BioNTech’s vaccine could be the first to be cleared for use, but first it must undergo a thorough vetting. The filing could enable its use by the middle to the end of December, the companies said in a statement. Yet, it could take at least three weeks for a U.S. Food and Drug Administration decision.

Uncertainty over a recovery in the oil market will be one of the challenges for the Organization of Petroleum Exporting Countries and its allies when they meet in less than two weeks to discuss whether or not to add crude oil to a still-saturated market in January.

Ahead of the OPEC+ meeting, which could see a possible extension of the current output cuts by three-to-six months, a buying spree by Asian refiners is complicating the outlook amid surging production from countries such as Libya. Crude stockpiles in China have fallen in five out of the past seven weeks, according to data from Ursa Space Systems.

This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.