OIL FUTURES: Crude extends rally as vaccine progress boosts hope of demand rebound

Oil futures settled higher Nov. 10 as optimism surrounding a coronavirus vaccine boosted demand outlooks.

NYMEX December WTI settled $1.07 higher at $41.36/b, and ICE January Brent was up $1.21 at $43.61/b.

Energy prices continued to benefit from demand-side optimism following Nov. 9 news from Pfizer and BioNTech that their coronavirus vaccine had shown itself to be more than 90% effective in a Phase 3 trial.

Front-month Brent settled at the highest since Sept. 3, while WTI was last higher Oct. 20.

NYMEX December RBOB settled 3.34 cents higher at $1.1941/gal, and December ULSD was up 3.58 cents at $1.2525/gal.

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"The market was just too negative, and now with hope for a vaccine—even if next year—in the short term, it changes the dynamic," said Price Futures Group senior market analyst Phil Flynn. "You had a demand curve that was trending down and expected to fall off the map, to a situation where demand could flip the other way and explode next year."

The contango in front-month versus year-ahead WTI futures narrowed to $1.89/b from as much as $3.60/b Nov. 6, the trimmest since late July.

The US Energy Information Administration on Nov. 10 cut its outlook for 2021 global oil demand growth by 360,000 b/d from last month's forecast to 5.9 million b/d on uncertainty surrounding the pandemic response.

EIA now expects global oil demand to average 92.9 million in 2020, plunging from 101.5 million b/d in 2019 as a result of the coronavirus pandemic. EIA forecasts global oil demand at 98.8 million b/d in 2021.

EIA also cut its outlook for US gasoline demand by 300,000 b/d for fourth-quarter 2020 and by 200,000 b/d for the first half of 2021.

But the recent vaccine progress allowed the market to largely look past the newly bearish outlooks, analysts said.

The front-month ICE New York Harbor RBOB crack against Brent was holding at around $6.26/b in afternoon trading, on pace to close at a one-month high.

The price also was buoyed by expectations that the OPEC+ group, which meets Nov. 30-Dec. 1, will extend its current 7.7 million b/d in output cuts through at least the first few months of 2021, instead of tapering them to 5.8 million b/d as currently scheduled.

OPEC and its allies could "tweak" their supply accord beyond analyst expectations, Saudi energy minister Prince Abdulaziz bin Salman said Nov. 9, as speculation swirled on how the coalition will set its 2021 production quotas.

Delegates have told S&P Global Platts that the cuts could even be deepened, although achieving unanimous agreement on this would be politically difficult.

Progress on the coronavirus vaccine would likely support such an extension as member states may be more willing to commit to cuts if they are viewed as a temporary necessity rather than an indefinite measure.