Update: Crude Set for Third Weekly Gain as Potential COVID-19 Vaccines Bolster Confidence

Friday, November 20, 2020 2:17 PM | MT Newswires

(Updates with the price move, Commerzbank/EIA reports and general market commentary from the first paragraph.)

US crude headed for a third week of gains as the prospects of highly effective COVID-19 vaccines potentially ready for distribution by the end of this year tackled concerns related to the near-term impact of the coronavirus shutdowns on economic growth and production discipline at the world's biggest oil industry cartel.

The West Texas Intermediate futures rose by 0.8% to $42.08 intraday, and its international counterpart, Brent, climbed by 1.2% to $44.74. The WTI is up 19% this month, with a bulk of the gains coming in off the back of a string of coronavirus vaccine announcements.

The European Union is likely to spend $10 billion on "hundreds of millions" of COVID-19 vaccines being developed by Pfizer (PFE)-BioNTech (BNTX) and CureVac, Reuters reported Friday, citing an EU official involved in the talks. Pfizer and BioNTech will submit a request on Friday to the US Food and Drug Administration seeking emergency use authorization for their vaccine candidate, a key step to making it available to higher-risk populations in the US by next month.

AstraZeneca (AZN) and the University of Oxford's COVID-19 vaccine candidate has shown itself to be "safe and well tolerated," with a similar immune response across age groups in a phase 2 trial. This followed Moderna's (MRNA) announcement on Monday that early results showed its COVID-19 vaccine was 94% effective in a phase 3 study and it shortly plans to file for an emergency use authorization in the US.

While the arrival of a coronavirus vaccine seems imminent, the virus continues to spread and delay economic recovery in the US and Europe.

The US recorded more than 187,000 COVID-19 cases on Thursday, with infections continuing to set new records almost daily in November, according to data compiled by Johns Hopkins University. New York City said Wednesday its schools would operate classes remotely, shutting down the largest public school system in the country.

Apart from concerns over demand for oil due to the economic impact of the global respiratory crisis, supply issues are also creeping up relating to production discipline in an alliance between the Organization for the Petroleum Exporting Countries and non-OPEC producers led by Russia, or OPEC-plus.

A report from Commerzbank said Friday the United Arab Emirates, which is currently OPEC's third-biggest oil producer after Saudi Arabia and Iraq, recently showed some reluctance to continue fully implementing voluntary cuts beyond the end of the year. As part of an agreement signed in April by OPEC-plus, daily output cuts being implemented by the alliance would reduce by 2 million barrels per day from next year as part of a predetermined timetable.

"If this example were also to be followed by other OPEC members, this could result in an oversupply on the oil market," Eugen Weinberg, Commerzbank's head of commodity research, said in the report.

Meanwhile, the US oil rig count fell by five to 231 during the week that ended Nov. 20, declining for the first week in nine, according to data compiled by Baker Hughes (BKR). The combined oil and gas rig count for the US decreased by two to 310, as gas rigs climbed by three to 76.

On Wednesday, the Energy Information Administration said US crude inventories rose by 768,000 barrels during the week that ended Nov. 13, compared with the forecast for an increase of 1.7 million barrels in a Reuters' survey of analysts.

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