Oil Advances From 12-Week High on U.S. Vaccination Optimism

(Bloomberg) — Oil pushed higher after closing at the strongest level since early September as signs that Covid-19 vaccinations in the U.S. could be underway within three weeks improved the demand outlook.

Futures in New York rose past $43 a barrel after capping their third straight weekly gain. Vaccinations will “hopefully” start as soon as Dec. 11 or Dec. 12, Moncef Slaoui, head of the American government’s Operation Warp Speed vaccine acceleration program, said on CNN on Sunday.

Houthi rebels in Yemen, meanwhile, claimed in a statement to have struck a Saudi Aramco fuel distribution center in Jeddah on the kingdom’s west coast with a missile. Aramco didn’t immediately respond to a request for comment.

chart: Timespreads reflect glut concerns easing

© Bloomberg
Timespreads reflect glut concerns easing

Crude has jumped around 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.


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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 apparent attack on the Aramco facility isn’t likely to have a long-lasting impact on prices, she said.

West Texas Intermediate for January delivery rose 1.4% to $43.03 a barrel on the New York Mercantile Exchange at 7:45 a.m. in London after climbing 1.2% on FridayBrent for January settlement added 1.7% to $45.72 a barrel on the ICE Futures Europe exchange after closing up 1.7% on FridayCrude futures on the Shanghai International Energy Exchange rose 2.8% to 267.9 yuan a barrel after climbing 1.3% last week

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.

See also: Could OPEC’s House of Cards Collapse?: Julian Lee

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 8 cents a barrel in contango on Monday, compared with 48 cents at the end of October.

Other oil-market news:
China is drawing down its elevated oil inventories on a combination of rebounding domestic demand and falling imports due to independent refiners using up most of their quota.Abu Dhabi will invest 448 billion dirhams ($122 billion) in oil and natural gas over the next five years as it seeks to raise production capacity, even while OPEC restricts its output.The pandemic-driven surge in online shopping continues to sustain diesel as a bright spot in an otherwise devastated U.S. fuel market.

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