Oil Up on US 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.

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.

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.

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.

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.

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