Oil prices extended gain towards $42 a barrel with investors evaluating update of another COVID-19 vaccine breakthrough. This occurs incongruence to OPEC’s decisions, as it slowly paces further towards to delaying a planned easing of output cuts. Futures in New York advanced 0.7% following a 3% increase on Monday after Moderna Inc reported its vaccine was almost 95% effective in a preliminary analysis of a large, late-stage clinical trial.
Optimism rose after an OPEC+ panel said the group, which meets again on Tuesday, should consider delaying an immediate push to boost production by three to six months. Brent crude futures for January rose 16 cents, or 0.4%, to $43.98 a barrel by 0104 GMT and U.S. West Texas Intermediate crude for December added 13 cents, or 0.3%, to $41.47 a barrel. OPEC has scheduled a ministerial committee meeting on Tuesday that could recommend changes to production quotas when all the ministers meet on November 30 and December 1.
As Europe and the US suffer from the escalating number of COVID-19 cases, Asia is slowly recovering and showing an increasing demand for oil. Purchase of physical crude cargoes has also intensified, with Asian refiners outbidding one another to reserve maximum oil in the spot market. Still, concerns over a second wave resulting in more damages and the possibility of more lockdowns continued to instil fear in producers.
The OPEC+ coalition, which is scheduled to increase crude production by almost 2 million barrels a day in January, should delay its output hike because risks for the oil market are skewed to the downside, the group’s Joint Technical Committee said. “We are seeing a bit of follow-through strength after the Moderna vaccine news, while the recommendation from the JTC to extend current cuts is also providing some support,” said Warren Patterson, head of commodities strategy at ING Group.
“If we judge economic recovery, particularly through the lens of oil markets… with multiple high efficacy vaccines in the pipeline, there is good chance mobility will return close to pre-pandemic levels later in 2021,” said Stephen Innes, chief global markets strategist in a note.