Oil moves higher on latest Covid-19 vaccine progress

Oil prices climbed on Monday, recouping some losses from the previous session after US company Moderna Inc said its experimental vaccine was 94.5% effective in preventing Covid-19.

Brent crude futures for January LCOc1 were up $1.48, or 3.5%, to $44.26 a barrel by 1215 GMT, while US West Texas Intermediate crude for December CLc1 was at $41.63, up $1.5 or 3.7%.

Prices were also buoyed by new data showing a rebound in the world’s second and third largest economies, China and Japan, as figures showed Chinese refineries processed the most crude ever in October on a daily basis.

Moderna’s announcement comes after Pfizer Inc reported last week that its vaccine was more than 90% effective, raising hopes that the damage to the global economy from the pandemic could be reduced.

Both WTI and Brent gained more than 8% last week on hopes for a vaccine for Covid-19 and that the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, would maintain lower output next year to support prices.

The group, known as OPEC+, has been cutting production by about 7.7 million barrels a day (bpd), with compliance rate seen at 101% in October, and had planned to increase output by 2 million bpd from January.

OPEC+ is set to hold a ministerial committee meeting on Tuesday that could recommend changes to production quotas when all the ministers meet on November 30 and December 1.

“There is no denying that the oil market is fully in the hands of OPEC+,” SEB chief commodity analyst Bjarne Schieldrop said. “The organisation is the only reason why oil prices today are not $20 a barrel. As such, their upcoming meeting on November 30 and December 1 is no less hugely important.”

However, Libya’s speedy recovery in production to more than 1.2 million bpd presents a challenge to OPEC+ cuts, while a slowdown in traffic across Europe and the United States has dampened fuel demand recovery hopes this winter.