Crude oil prices rose Nov. 20 on news that the first COVID-19 vaccine doses could be available by the end of the year, but the reaction was tempered by rising coronavirus cases in North America and Europe and the fear of family gatherings during the upcoming US Thanksgiving holiday further escalating the pandemic.
On the final day of trading for the NYMEX WTI December contract, front-month NYMEX WTI rose 52 cents to settle at $42.42/b for the week while ICE January Brent jumped 76 cents to settle at $44.96/b.
"Crude prices are set for a third consecutive weekly gain on vaccine optimism, but the near-term outlook will likely prevent any significant moves higher as the likelihood of more lockdowns grows," said Edward Moya, senior market analyst with OANDA.
"A lot of Americans may ignore the CDC recommendation to cancel Thanksgiving plans and that will keep the energy markets prepared for further and longer lockdowns across the US throughout December," he added, citing the recent advisory from the US Centers for Disease Control and Prevention.
While there is longer-term optimism on crude prices and demand, and front-month NYMEX WTI hit its highest settled price since Sept. 2, WTI futures contracts are still sitting just below $43.50/b in 11 months.
Pfizer and its German partner BioNTech applied Nov. 20 for emergency approval to start delivering COVID-19 vaccine doses by the end of December, although a much larger rollout would drag out well into 2021.
The announcement comes shortly after they said the vaccine appears 95% effective at preventing mild to severe COVID-19 disease in a large, ongoing study. The move starts the clock for the approval process at the US Food and Drug Administration.
Moderna's similar vaccine is progressing with claims of nearly 95% effectiveness as well.
However, the daily COVID-19 death count in the US has risen near 2,000 people again for the first time since May, daily caseloads are at all-time highs, and unemployment claims are back on the rise. Some European countries are making more progress in slowing the rising cases, but only after implementing stricter economic lockdowns that hurt oil demand.
And, in both the US and the EU, stimulus package talks remain on hold, including opposition from Poland and Hungary in the EU.
As for products, NYMEX December RBOB increased 1.27 cents to settle at $1.1752/gal while December ULSD was up 1.56 cents at $1.2863/gal.
Eyes on OPEC+
In the meantime, there is ongoing optimism that the OPEC+ group will opt to extend its current production cuts into 2021. However, OPEC is still seeing production volumes rise as Libya ramps up output following a recent peace deal among warring factions.
But there is some fear that OPEC+ could instead decide to reduce its cuts if crude prices keep rising ahead of its December meeting, said Craig Erlam, also of OANDA.
"The vaccine news has been a gamechanger for the outlook. No longer is OPEC+ the only major upside risk," Erlam added.
A combination of OPEC+ and vaccine optimism has helped crude prices move higher, although they've yet to break out more meaningfully, said Bjornar Tonhaugen, Rystad Energy's head of oil markets.
But that stronger pricing jump could come in 2021, he said, when demand finally begins to rebound.
"Until the end of this year, global oil demand will stay suppressed owing to the growing extent of global curfews and lockdowns, with Europe still the epicenter for restrictions," Tonhaugen added.
