Oil down after Covid-19 vaccine bump
LONDON, November 10, 2020 – Oil was down on Tuesday morning in Asia, losing some of Monday’s large gains. Prices had jumped over 8% on positive news from a major Covid-19 vaccine trial.
Brent oil futures fell 1.23% to $41.88 by 12:22 AM ET (4:22 AM GMT) and WTI futures slid 1.56% to $39.66.
Markets across the globe surged yesterday on news from Pfizer ‘s (NYSE:PFE) Covid-19 vaccine trials that suggests a 90% effectiveness rate. Both Brent and WTI futures moved above the $40 mark earlier in the sessions, with WTI futures since moving back below the price mark.
However, the reality of short-term demand concerns pulled prices back somewhat in Asia on Tuesday morning, as the vaccine has yet to demonstrate other key points such as safety and the duration of conferred immunity.
“A viable vaccine is unequivocally game-changing for oil – a market where half of demand comes from moving people and things around,” JP Morgan said in a note. “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.”
The Covid-19 pandemic continues to rage across the globe, with lockdowns across Europe and soaring cases in the US, where total cases have now passed 10 million and daily new cases of 120,000, according to data from Johns Hopkins University. As such, the global demand outlook is still grim, and likely to become worse well before it improves.
“The fast-tracking of multiple vaccines doesn’t mitigate the risk that many US states will have to return to some form of lockdown this autumn/winter,” Rystad Energy’s head of oil markets Bjornar Tonhaugen told Reuters.
Prices were given a boost from Saudi Arabia’s energy minister Prince Abdulaziz bin Salman, who said on Monday that the Organization of Petroleum Exporting Countries and their allies (OPEC+) might further regulate their output if required. OPEC+ will next meet on November 30 and December 1.
“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.
However, concerns that the incoming US presidential administration might allow more Venezuelan and Iranian oil back onto the global market are also negative factors on the supply side.
Investors now await crude oil supply data from the American Petroleum Institute, due later in the day.
First published on Investing.com