Oil extended gains, following Monday’s rally on optimism that a potential Covid-19 vaccine could boost a recovery in transport demand. Crude futures in New York approached $41 a barrel, after advancing more than 10% at one point on Monday. It comes after early findings showed that a vaccine developed by Pfizer Inc. and BioNTech SE protects most people from the virus. While headline prices are gaining, there have also been sharp moves in the structure of the curve. Brent futures for six months ahead were at their strongest versus 12 months out since March, a sign that traders are growing more positive on supply and demand balances for the second half of the year. In another sign of strength, The Middle Eastern Dubai benchmark was trading in a bullish backwardation structure.
Crude has mirrored a wider rally in equities markets, on optimism that a vaccine will help mobility return to normal levels. In the near term, the market continues to wrestle with a mixed demand picture, with Europe still under new virus restrictions. Consumption is improving in China, while oil demand in Japan is roughly back to normal.
“For oil markets, the advent of vaccines could turn the focus from the short-term supply demand question onto how the oil market might cope with a recovery in demand in 2021,” said Callum Macpherson, head of commodities at Investec Bank Plc. “It may help to embolden governments into easing lockdowns.”
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