Crude futures rally continues in Asia on hopes of new COVID-19 vaccine

Singapore — 0224 GMT: Crude oil futures traded higher in mid-morning trade in Asia Tuesday after news of progress made in developing a COVID-19 vaccine emerged late Monday.

At 10:24 am Singapore time (0224 GMT), ICE Brent July crude futures rose 37 cents/b (1.06%) from Monday's settle at $35.18/b, while the NYMEX June light sweet crude contract was 89 cents/b (2.8%) higher at $32.72/b.

A US biotech firm reported on Monday, promising early results from its first clinical tests of an experimental vaccine against COVID-19, media reports showed. The news sent stock markets higher.

"Separately with crude oil prices, the latest positive news had likewise fueled gains with hopes of further demand recovery alongside any vaccine development," IG market strategist Pan Jingyi said in a note Tuesday.

Crude prices settled higher on Monday, extending last week's rally, amid improved supply and demand outlooks.

"Evidently the improvement in the supply and demand balance had been underway and alleviates concerns that had been present in the last countdown to the front month contract expiry," Pan added.

Signs of an easing supply glut helped to lift prices recently, with the OPEC+ accord underway and slowing US shale production.

Declining US shale oil output is projected to slide further in June by 197,000 b/d to 7.822 million b/d, a drop of 15,000 b/d compared to what was expected last month, the US Energy Information Administration said Monday.

The easing of lockdown restrictions in China has also led to an increase in crude oil throughput in domestic refineries. Stepped-up Chinese crude purchases are hence likely to offer some relief to the supply glut.

"That said, as with various equity indices, [oil] prices can be seen approaching resistance where prices had last stalled after the gap down on the COVID-19 shock in early March," Pan said.

Nevertheless, investors remain cautious over further COVID-19 development, as lockdown measures ease globally, and the existing trade tensions between the US and China.