Crude futures settled lower Dec. 11 as demand outlooks came under pressure, with US pandemic lockdowns spreading and the US Congress deadlocked on stimulus spending.
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NYMEX January WTI settled 21 cents lower at $46.57/b, while the $50/b level proved unsustainable for ICE February Brent, which fell back 28 cents to settle at $49.97/b.
Deliberations from the US Food and Drug Administration on whether to grant emergency authorization for the Pfizer-BioNTech vaccine continued Dec. 11, extending for a second day in what many expected to be a swift approval. The UK began administering the Pfizer-BioNtech vaccine Dec. 8.
French pharmaceutical company Sanofi, along with its development partner GlaxoSmithKline, announced Dec. 11 a setback in their COVID-19 vaccine development that would delay first deployment until late 2021.
NYMEX January RBOB settled 89 points lower Dec. 11 at $1.3077/gal, while January ULSD climbed 12 points to settle at $1.4369/gal.
Front-month Brent still finished the week around 1.5% higher, while WTI managed to climb around 0.7% from last Friday's close.
The recent rally in crude prices has been heavily dependent on optimism that rapid vaccine deployment would both improve longer-term demand outlooks and potentially preempt a return to widespread lockdowns seen this past spring. But as case numbers rise, especially in the US, these demand-destroying lockdowns appear increasingly likely.
New York Governor Andrew Cuomo on Dec 11 announced a ban on indoor dining in New York City restaurants starting Dec. 14.
"Too much optimism has been priced in for vaccine rollout, and if we see further delays like we have with GSK/Sanofi, that could start to weigh on the snapback trade that is heavily priced in for early next year," OANDA senior market analyst Ed Moya said in a note. "For the demand recovery outlook to remain in place, vaccine execution must be successful. For both the US and Europe to get the virus under control, more vaccines need to get approvals and not see a production or distribution issues."
Adding to demand headwinds, Congress adjourned this week after passing a one-week funding extension aimed at avoiding a government shutdown, but with no progress on a deadlocked coronavirus stimulus package. If Congress fails to act, around 12 million Americans will lose unemployment protections later this month, according to media reports.
While near-term outlooks remain under pressure from rinsing case numbers, the forward-dated crude structure has turned more bullish in recent weeks as longer-term demand outlooks have improved following the development of multiple COVID-19 vaccines.
To date in December, year-ahead Brent and WTI futures have maintained a roughly 72 cent/b and 27 cent/b backwardation, respectively, compared with front-month contracts. This is significantly more bullish than in November, when the same spread was in contango by $1.66/b and $1.58/b, respectively.