Oil steadies above $43 on COVID-19 vaccine progress

·3 min read
An employee holds a gas pump to refill a car at a petrol station in central Seoul April 6, 2011. South Korea's government said in a statement on Wednesday that it will consider cutting oil taxes if crude prices rise further, without giving details. The announcement came soon after the country's smallest crude oil refiner joined three other refiners in lowering gasoline and diesel prices to help the government curb domestic inflation.   REUTERS/Lee Jae-Won (SOUTH KOREA - Tags: BUSINESS ENERGY)
An employee holds a gas pump to refill a car at a petrol station in central Seoul. Photo: Lee Jae-Won/Reuters

The benchmark Brent (BZ=F) crude price stayed above $43 (£32.50) a barrel for a second day as global market sentiment continues to be boosted following news of Moderna’s (MRNA) successful coronavirus vaccine trial, which the company says has a 94.5% efficacy rate.

The rally was less dramatic than last week’s when markets surged over Pfizer (PFE) and BioNTech’s coronavirus vaccine candidate, which was the first one to be announced since the pandemic hit earlier this year.

Brent (BZ=F) sat at $43.70 a barrel at around 9:10am in London.

Brent held its gains for a second day as news of a second successful COVID-19 vaccine candidate arrived on Monday.
Brent held its gains for a second day as news of a second successful COVID-19 vaccine candidate arrived on Monday. Chart: Yahoo Finance

“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. “Hopes of a return of social mobility saw airlines rally overnight, and that flowed through to anticipated oil consumption and higher oil prices. Oil had already rallied in Asia after robust regional data, with the vaccine news energising the rally further.”

Industries that had been hard hit, including travel and cruise stocks, were buoyed by news of a gradual reopening of the global economy. Investors started buying back into cruise liners, airlines and casinos, with Carnival Corp. (CCL), Royal Caribbean Cruises Ltd. (RCL) and Norwegian Cruise Line Holdings Ltd. (NCLH) all gaining in early trading on Monday. The cruise sector has been among the market’s worst performers in the wake of COVID-19, with this trio of stocks shedding between 47% and 69% of their value this year before Monday’s session.

“Moderna’s news suggests that other vaccine candidates could elicit a similar degree of efficacy,” said Stephen Innes, chief global market strategist. “Clarity can only increase with the rollout of vaccine programs, which is crucial for firms in assessing their 2021 hiring and investment plans.”

READ MORE: European market momentum slows following a second COVID-19 vaccine rally

Oil watchers are also increasingly optimistic as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, are set to hold a ministerial committee meeting on Tuesday. It is expected that they will recommend changes to production quotas when all the ministers meet on Nov. 30 and Dec. 1.

The group is largely expected to postpone a planned January increase in oil output for at least three months to prop up prices as many countries continue to struggle with the second wave of the coronavirus.

Despite the US and Europe still being hampered by rising COVID-19 cases, Asia’s market has rebounded from the pandemic and the appetite for oil has also gained.

China, the world’s second largest oil consumer, saw its crude oil demand in October rise to its highest-ever level.

“Oil demand in China is exceeding pre-COVID-19 levels which suggests oil demand is not permanently impaired,” analysts from Bernstein Energy said.

Watch: Why can’t governments just print more money?

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