Crude settles higher on COVID-19 vaccine progress, OPEC+ talks

Oil futures settled higher Nov. 16 as supply and demand outlooks grew more bullish on COVID-19 vaccine progress and signs that OPEC+ was moving closer to extending output cuts into 2021.

NYMEX December WTI settled up $1.21 at $41.34/b and ICE January Brent was $1.04 higher at $43.82/b.

Oil futures stepped higher overnight following reports of a second COVID-19 vaccine developed by US company Moderna that is nearly 95% effective, according to data from the company Nov. 16. The news comes on the heels of a Nov. 9 announcement from pharmaceutical companies Pfizer and BioNTech that their coronavirus vaccine had shown itself to be more than 90% effective in a phase 3 trial.

ADDITIONAL COVERAGE: COVID-19

NYMEX December RBOB settled 2.14 cents higher at $1.1468/gal and December ULSD was up 2.47 cents at $1.2289/gal.

While the vaccine progress was generally bullish for demand outlooks, near-term headwinds persisted amid fast-rising caseloads.

In the US, the seven-day moving average of new coronavirus cases reached a fresh all-time high 145,344 on Nov. 15, according to data from The Covid Tracking Project. Apple Mobility data accessed by S&P Global Platts showed that US driving activity during the week ended Nov. 13 was the lowest since late May.

The front-month ICE New York Harbor RBOB crack against Brent fell to around $4.41/b in afternoon trading, the lowest since mid-August.

"The short-term headaches for the crude demand outlook however remain firmly in place," OANDA senior market analyst Edward Moya said in a note. "WTI crude looks ready to run higher but it may have to wait until the current coronavirus situation is under control in both Europe and the US."

Still, crude forward structure turned more bullish. Year-ahead WTI futures settled at a $1.72/b premium to the front-month contract, the weakest contango since July 24.

Meanwhile, key oil ministers from OPEC and its allies will hold critical talks Nov. 17 on 2021 production quotas, steered towards an extension of current output cuts through March or June by an uncertain near-term market outlook.

OPEC+ ministers are weighing whether to relax their current 7.7 million b/d in collective production cuts to 5.8 million b/d as originally scheduled, maintain them at the same level for a few months, or even deepen them.

Saudi energy minister Prince Abdulaziz bin Salman has previously said the deal could be "tweaked" as market conditions warrant. An advisory delegate-level technical committee met Nov. 16, reviewing scenarios in which the current cuts were extended for three months or six months, sources told Platts.

Such an extension would help bolster the market as it awaits the mass availability of a COVID-19 vaccine, but many members are weary of having sacrificed so much production for so long already.

Demand outlooks also gleaned support from an unexpected increase in Chinese crude demand in October. China's domestic refineries processed 14.15 million b/d of crude oil in October, rising 0.9% on the month, to end the downtrend and hit a fresh record high, the National Bureau of Statistics' data released Nov. 16 showed.

The high throughput in October was unexpected, analysts said.

"We previously projected October crude throughput to remain in the low levels with notable cuts from state-owned refineries, due to high oil product inventory and weaker than expected demand," a Beijing-based analyst said.

The country's previous record high throughput was 14.14 million b/d in June, NBS data showed.