Crude oil rates surged more than 10 per cent on Monday in their biggest single-day gain in six months, on hopes of a COVID-19 vaccine and a cut in output by top producers. Brent crude futures – the global benchmark for crude oil – soared to quote at $43.48 per barrel at the strongest level recorded during the session compared to their previous close. That marked an increase of $4.03 per barrel – or 10.22 per cent – at the intraday high, compared to Friday’s close of $39.45 per barrel.
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US-based drug maker Pfizer said its experimental vaccine was more than 90 per cent effective in preventing COVID-19, based on initial data from a large study.
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The news of a highly effective vaccine against COVID-19 boosted oil markets, which have been battered by the impact of the pandemic-related restrictions around the globe since March.
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Assurance by Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, that a deal with oil producers allied with the Organization of the Petroleum Exporting Countries, a group known as OPEC+, can be adjusted if there is consensus among members provided strong support to the rates.
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The OPEC+ group has already agreed to supply cuts of 7.7 million barrels per day (bpd) by around 2 million bpd from January.
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While Brent crude jumped too as high as $43.48 per barrel, the New York Mercantile Exchange’s WTI or West Texas Intermediate futures – the benchmark for US oil rates – jumped 4.19 per cent to $41.33 per barrel during the session.
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Analysts say a Joe Biden administration could be positive for US oil compared to the second term for President Donald Trump.
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According to Motilal Oswal Financial Services, tougher regulations on hydraulic fracturing would likely reduce production, raising crude prices to levels of $45-$55 (WTI) in coming months after US elections.
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This is on account of the challenger pledging to end new drilling on public lands and move towards a carbon-free future, the brokerage said in a note. Mr Biden’s election win will likely be an upward catalyst for oil prices, Motilal Oswal said.
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The dollar weakened on Monday, hitting a 10-week low and boosting dollar-priced commodities that become more affordable for buyers outside the US. That also provided some support to oil rates.
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However, analysts say renewed lockdown measures in European to contain the coronavirus infections still appear set to affect the outlook for global oil demand.
