Crude Oil Futures Boosted by Good News

  • "Moderna's vaccine announcement had probably its largest effect on oil out of the main asset classes."
  • In addition, early crude oil futures were also supported by optimistic Asian data.
  • Traders are still waiting for the results of the joint ministerial supervisory committee meeting on Tuesday.

Oil prices edged up Tuesday amid news from the US financial sector and stocks, news on vaccine research and development progress, and news about OPEC+ considering delays in increasing crude oil production. The news reassured the market that epidemic prevention measures will lead to a decline in energy demand.

Oil barrels

Crude oil futures were boosted sharply as well. December West Texas Intermediate crude oil traded on the New York Mercantile Exchange rose $1.21, to close at $41.34 a barrel, an increase of 3%.

On the ICE European Futures Exchange, the global benchmark Brent crude oil rose by $1.04 in January to close at $43.82 per barrel, an increase of 2.4%.

“Moderna’s vaccine announcement had probably its largest effect on oil out of the main asset classes,” said Jeffrey Halley, senior market analyst at OANDA. He added that positive vaccine news has “almost certainly put a long-term floor under oil prices.”

Moderna said its vaccine candidate prevented 94.5% of infections in later trials. Prior to this, Pfizer Pharmaceuticals and BioNTech SE BNTX said last week that their vaccine candidates are more than 90% effective.

“Global oil and gas operators will chase plenty of additional volumes in wildcats planned for the final two months of 2020, although some may not be completed until early 2021 and will therefore add to next year’s tally,” Palzor Shenga, a senior upstream analyst at Rystad Energy, said in a company statement.

“First, oil and gas players are streamlining portfolios and exploration strategies and will scrutinize prospects more closely than before, thereby reducing the number of wells that will be drilled,” Rystad Energy said in a statement posted on its website.

“Second, companies will be less willing to drill high-risk wells in environmentally sensitive frontier areas, both for financial and environmental reasons,” the company added in the statement.

In addition, early crude oil futures were also supported by optimistic Asian data. China’s October industrial output increased by 6.9% year-on-year, retail sales increased by 4.3% year-on-year, an increase of 1 percentage point from the previous month. In the first 10 months of 2020, investment in factories and other fixed assets increased by 1.8%, an increase of 1 percentage point from the previous nine months.

Traders are still waiting for the results of the joint ministerial supervisory committee meeting on Tuesday. The committee is responsible for tracking the production cuts from OPEC and its allies.

The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization of 14 nations, founded on 14 September 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), and headquartered since 1965 in Vienna, Austria.

Warren Patterson, Head of Commodity Strategy at ING, said in a report that “the committee may make recommendations, but we have to wait until all the OPEC+ meetings from November 30 to December.”

He said, “It is believed that OPEC+ needs to extend the current production cut of 7.7 million barrels per day for at least another three months to ensure that the market reduces inventories in the first quarter of next year.”

Reuters quoted OPEC+ sources as saying that another joint technical committee meeting on Monday to assess the state of the global oil market held that the OPEC+ compliance rate in October was 96% of production cuts.

The production cuts include reducing production to make up for past excess production. At the end of the meeting, most countries supported the extension of the current production reduction measures for three months.

Among other energy products traded on the New York Mercantile Exchange, gasoline prices rose 1.9% in December to $1.1468 per gallon. Heating oil prices rose nearly 2.1% to $1.2289 per gallon in December. The December natural gas futures contract NGZ20 fell 10% to $2.697 per million BTUs.

According to Dow Jones market data, this is the largest single-day percentage drop since September last year. Christine Redmond, a commodity analyst at Schneider Electric, said, “the combination of mild weather forecasts and strong production pushed down prices.”

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Joyce Davis

My history goes back to 2002 and I  worked as a reporter, interviewer, news editor, copy editor, managing editor, newsletter founder, almanac profiler, and news radio broadcaster.

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