Crude prices rangebound as bearish factors offset FDA vaccine approval optimism

Singapore — 0257 GMT: Crude oil futures were rangebound during midmorning Asia trading Dec. 14 as multiple bearish factors, including stymied US stimulus negotiations, the prospect of more Iranian oil, and near-term pandemic considerations, weighed on the market that had received a boost after the US Food and Drug Administration granted the Pfizer-BioNTech COVID-19 vaccine Emergency Use Authorization.

At 10:57 am Singapore time (0257 GMT), the ICE February Brent futures contract was up 9 cents/b (0.18%) from the Dec. 11 settle at $50.06/b while the NYMEX January WTI light sweet crude contract was down 1 cent/b (0.02%) at $46.56/b. Both markers had risen 1.46% and 0.67% in the week to Dec. 11 to settle at $49.97/b and $46.57/b, respectively.

There was optimism earlier on news that the FDA granted an emergency authorization late Dec. 11 to the Pfizer-BioNTech vaccine, which had begun shipping from Pfizer's Kalamazoo facility for distribution.

"The oil markets are trading up this morning as the FDA approves the vaccine's emergency rollout ... a convoy of trucks is already making their way from Pfizer Kalamazoo headquarters to US hospitals and the Airline industry is also kicking in by offering idled planes as vaccine cargo haulers," said Stephen Innes, chief global strategist at Axi, in a Dec. 14 note.

"Indeed, this will help assuage some of the market's growing laundry list of near-term economic worries," he added.

ANZ analysts echoed this sentiment, saying in a Dec. 14 note, "Investors have been buoyed by the rollout of the COVID-19 vaccines, which promise to enable governments to ease restrictions that have hindered crude oil demand."

However, bearish factors continued to remain at play as negotiations over a US stimulus package remained stalled over issues like government aid to states and a COVID-19 "liability shield" for businesses and entities, such as schools and universities.

Elsewhere in Iran, state news agency IRNA reported Dec. 13 that the country is planning to produce 4.5 million b/d of crude oil and condensate in its next year that starts March 21, 2021, and export 2.3 million b/d of it, if current US sanctions are lifted.

All along, the coronavirus pandemic has continued to escalate in the US and Europe, with the former rapidly nearing the grim milestone of 300,000 COVID-19 deaths.

After a light lockdown imposed at the start of November failed to curb the spread of the virus, Germany announced on Dec. 13 a more stringent lockdown, which will start from Dec. 16 and end on Jan. 10, 2021. The lockdown will see most schools and shops closing down, according to media reports.

Chris Midgley, global head at S&P Global Platts Analytics, said Dec. 11 that while Platts Analytics expects global oil demand to rise by more than 6 million b/d in 2021, fundamentals for the oil market are not as rosy in the near-term.

"While in the long-term we are more optimistic about a rebound of oil demand, causing us to upwardly revise our 2021 demand outlook, in the short term, we expect things to worsen, with increased second-wave lockdowns in U.S. and Europe resulting in much weaker gasoline demand across the holiday season," he said.