Saudi Arabia confirmed that Houthi rebels in Yemen targeted an oil facility in northern Jeddah province.(REUTERS)
Saudi Arabia confirmed that Houthi rebels in Yemen targeted an oil facility in northern Jeddah province.(REUTERS)

Oil rises past August high on vaccine progress, Joe Biden transition

Vaccine optimism has oil heading for its best month since May, with investors looking past a worsening second wave that’s spurring more lockdown measures.
By Bloomberg | Posted by Srivatsan K C
PUBLISHED ON NOV 24, 2020 03:17 PM IST

Oil extended gains after closing at the highest level since August on signs Covid-19 vaccines could be rolled out within weeks and as the start of the US presidential transition process aided markets in general.

Futures in New York rose around 1% after settling above $43 a barrel on Monday. A vaccine developed by the University of Oxford and AstraZeneca Plc that prevented a majority of people from getting the disease could be deployed as soon as next month. That follows successful trials of two other anti-virus drugs. The triggering of a formal transition process to US President-elect Joe Biden buoyed stock markets and pushed down the dollar.

Vaccine optimism has oil heading for its best month since May, with investors looking past a worsening second wave that’s spurring more lockdown measures. Covid-19 is forecast to claim another 30,000 American lives by mid-December, Japan is moving toward boosting restrictions to contain the virus and Hong Kong is set to close bars and nightclubs, according to local media.

The prospect of imminent drug rollouts is reshaping the oil futures curve. Global benchmark Brent’s prompt timespread flipped into backwardation -- a bullish structure where prompt contracts are more expensive than later-dated ones -- on Monday for the first time since June. A rebound in Chinese local flights is also aiding demand for jet fuel, the hardest-hit oil product.

“The AstraZeneca vaccine is really a big deal as most developed markets will be able to immunize their most at-risk population to Covid-19 by spring,” said Stephen Innes, chief market strategist at Axi. “The continuing increase in infections in the US and elsewhere has been the primary source of oil demand uncertainty.”

The firming of the oil futures curve is a sign the market expects a rapid tightening of supplies ahead, RBC Capital Markets analysts wrote in a report. However, the forward curve for West Texas Intermediate looks overvalued with inventories still brimming at the Cushing, Oklahoma storage hub, they said.

WTI’s discount to Brent widened to the most since May amid expectations for OPEC+ to extend current output cuts into next year. Some members of the group are showing signs of strain, however. Iraq is seeking upfront payments of about $2 billion in exchange for a long-term crude-supply contract, the latest sign of Baghdad’s growing desperation for cash.

Saudi Arabia, meanwhile, confirmed that Houthi rebels in Yemen targeted an oil facility in northern Jeddah province, a reminder of the ever-present risk of instability in the region. The attack on Monday caused a fire at an oil tank inside a fuel-distribution center, the kingdom’s energy ministry said.

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Newly graduated Afghan National Army march during their graduation ceremony after a three-month training program at the Afghan Military Academy in Kabul, Afghanistan, Monday, Jan. 18, 2021. (AP Photo/Rahmat Gul)(AP)

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ANI
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Representative Image(AP (Representative Image))
Representative Image(AP (Representative Image))

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The finance ministry is expected to present details of its final 2020 budget on Tuesday. (Representative Image)(AP)

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Emirates airliners are seen on the tarmac in a general view of Dubai International Airport in Dubai, United Arab Emirates.(FILE PHOTO / REUTERS)

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Britain is currently rolling out the vaccine to the most vulnerable first, starting with those who are in care homes or over 80 years of age.(AP)
Britain is currently rolling out the vaccine to the most vulnerable first, starting with those who are in care homes or over 80 years of age.(AP)

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Reuters
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Minister for Covid vaccine deployment Nadhim Zahawi speaks at the House of Commons in London, Britain January 11, 2021.(via REUTERS)
Minister for Covid vaccine deployment Nadhim Zahawi speaks at the House of Commons in London, Britain January 11, 2021.(via REUTERS)

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Reuters
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The 44-year-old Navalny was detained at Moscow's Sheremetyevo airport less than an hour after he flew in from Germany.(Reuters)

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AFP
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Russian opposition activist Alexei Navalny gestures while speaking to a crowd during a political protest in Moscow, Russia. (AP)
Russian opposition activist Alexei Navalny gestures while speaking to a crowd during a political protest in Moscow, Russia. (AP)

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Bloomberg
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