Oil Set for Weekly Gain on Vaccine Optimism
(Bloomberg) -- Oil is poised for a third weekly gain in New York as positive Covid-19 vaccine developments outweighed concerns about more restrictions stemming from a global surge in infections.
Futures are back near $42 a barrel and set for the longest run of weekly gains since August following news of another vaccine breakthrough on Monday. Optimism around a vaccine offset a grim picture emerging across the U.S. with Americans urged not to travel for Thanksgiving, California ordering a one-month curfew and New York closing public schools.
Shrinking timespreads, meanwhile, are signaling concerns about over-supply are easing. The three-month timespread for Brent crude in London was 46 cents a barrel in contango, the narrowest since July.
Still, the oil market is facing an uncertain demand recovery, with a resurgent virus in the U.S. and Europe prompting tighter restrictions and keeping consumption in check, even as parts of Asia rebound strongly. The flaring outbreak will be a key issue for OPEC+ when it meets at the end of the month to decide on whether to delay a planned easing of cuts early next year.
“The vaccine news supports our view that world oil demand will move higher over the course of 2021,” said Victor Shum, vice president of energy consulting at IHS Markit. “There is promise of a better time, but the immediate future is grim. There is an alarming rate of new Covid-19 cases in North America and Europe.”
Ahead of the OPEC+ meeting, which could see a possible extension of 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. The African nation is now pumping 1.25 million barrels a day, with France’s Total SE in talks to increase energy investment in the country.
The United Arab Emirates, meanwhile, tried to ease a spat with its OPEC+ partners on Thursday, after officials privately questioned the benefit of its membership of the group. The UAE “has always been a committed member,” Energy Minister Suhail Al-Mazrouei said.
© 2020 Bloomberg L.P.
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