Crude oil futures rangebound as economic impact of pandemic weighs on vaccine optimism

Singapore — 0230 GMT: Crude oil futures remained rangebound during mid-morning trade in Asia Nov. 23 as market optimism over the pace of development of COVID-19 vaccines was countered by the more immediate impact of the pandemic on economic activity and global demand.

At 10:30 am Singapore time (0230 GMT), ICE Brent January crude futures were up 5 cents/b (0.11%) from the Nov. 20 settle at $45.01/b, while the NYMEX January light sweet crude contract was 5 cents/b (0.12%) lower at $42.37/b.

The contracts contract rose 5.1% and 5% respectively in the week ended Nov. 20 in a rally driven primarily by vaccine optimism, with speculation the incoming Biden administration was reluctant to impose a nationwide lockdown in the US and the signing of the Regional Comprehensive Economic Partnership among Asia-Pacific nations also boosting sentiment earlier in the week.

However, the focus shifted back to the progression of the coronavirus Nov. 23, with the trajectory of crude prices likely tethered to the market's assessment of the pandemic's impact on the global economy and on energy demand.

"The market will be looking at the upcoming Markit PMI data releases across the European Union, the UK and the US for clues as to how badly the pandemic has hit business activity in major economies," DailyFX strategist Margaret Yang told S&P Global Platts Nov. 23. "This Wednesday's US initial jobless claim figures and EIA crude oil inventories will be closely watched, too," she added.

Other market analysts emphasized the upcoming OPEC and non-OPEC Ministerial Meeting on Dec. 1, which is expected to provide clarity over the OPEC+ alliance's production plan going into 2021. Most market analysts expect the meeting to confirm a three- to six-month extension of the current 7.7 million b/d production cut, but some analysts, encouraged by hints from key figures within the OPEC+ alliance, believe that deeper production cuts could also be announced.

"The broader market is very aware that even the most promising vaccine news will not have a discernible effect on oil demand until at least the second half of 2021. But what will have an immediate impact on the oil market - or rather bring into better equilibrium the balance of supply and demand by drawing down inventory more definitively - is an OPEC quota extension," Axi global chief market strategist Stephen Innes said in a Nov. 23 note.