Futures Movers: Oil prices edge higher on vaccine optimism, tanker explosion

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Oil futures edged higher on Monday, with support tied to the U.S. rollout of the a COVID-19 vaccine, as well as an explosion on an oil tanker docked at the Saudi Arabian port of Jeddah.

“Overall optimism tied to the early stages of vaccine rollout have been key to crude’s rally,” said Robbie Fraser, manager of global research and analytics at Schneider Electric, in a note.

“While that offers a tangible reason to expect some longer-term demand and inventory normalization, the crude market will first have to confront an increasingly challenging winter,” he said. “Demand recovery, particularly in the U.S., has slowed of late as new COVID-19 cases surge,” and as a number of countries have implemented or are considering additional lockdown measures.

Contributing support to oil prices Monday, an oil tanker docked at Jeddah was struck and suffered an explosion, The Wall Street Journal reported, citing the ship’s owner.

“The incident marks the latest in a string of disruptions often linked to Yemen’s Houthi rebels, which have received some backing from Iran,” said Fraser. “In Iran, the country is reportedly looking at plans to quickly ramp up oil output in anticipation of a possible U.S. return to the [Joint Comprehensive Plan of Action] nuclear deal under a Biden administration.”

West Texas Intermediate crude for January delivery CL.1, -0.67% CLF21, -0.67% edged up by 9 cents, or 0.2%, to $46.66 a barrel, after touching a high of $47.44 on the New York Mercantile Exchange. February Brent crude BRN00, -0.46% BRNG21, -0.46% was up 9 cents, or 0.2%, at $50.06 a barrel, following a climb to as high as $50.90 on ICE Futures Europe. The global benchmark last week traded above $50 for the first time since March.

Efforts to roll out the COVID-19 vaccine developed by Pfizer Inc. PFE, -2.41% and BioNTech SE BNTX, -5.81% and given emergency authorization by the U.S. Food and Drug Administration late Friday began over the weekend.

Meanwhile, a bipartisan group of Senate and House lawmakers, which has pushed for a compromise $908 billion plan, were reportedly weighing the possibility of putting $160 billion of state and local aid and liability protections into a separate package, leaving a $748 billion aid plan that would provide $300 a week in additional state unemployment benefits for four months, $300 billion in aid to small businesses and $35 billion for health-care providers, The Wall Street Journal reported.

Some analysts wondered if crude would be able to keep pressing higher as COVID-19 cases continued to surge in the U.S. and elsewhere.

“I do wonder whether [the rally] is running out of steam though and given the near-term downside risks as Germany goes into a more severe lockdown and the US sees record cases and fatalities, with the trajectory still in the wrong direction going into the holiday period, that could create some downside pressure in the coming weeks,” said Craig Erlam, market analyst at Oanda, in a note.

“With OPEC+ remaining flexible though, downside risks may be more limited than we would otherwise see,” he said.

The Organization of the Petroleum Exporting Countries, or OPEC, on Monday cut its forecast for 2021 oil-demand growth. It cited “uncertainty surrounding the impact of COVID-19 and the labor market” on the outlook for transportation fuel in developed economies during the first half of next year for the lowered forecast.

OPEC cut its forecast for world oil-demand growth to 5.9 million barrels a day, down 350,000 barrels a day from its previous projection.

Back on Nymex, prices for petroleum products were mixed. January gasoline RBF21, -0.58% shed 0.1% to $1.306 a gallon, while January heating oil HOF21, -0.22% tacked on 0.2% to $1.4397 a gallon.

Natural gas for January delivery NGF21, +3.43% traded at $2.683 per million British thermal units, up nearly 3.6%.

Read: Natural-gas prices look to end the year higher for the first time since 2016

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