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OIL FUTURES: Oil prices surge as market eyes COVID-19 vaccine breakthrough

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OIL FUTURES: Oil prices surge as market eyes COVID-19 vaccine breakthrough

Highlights

WTI, Brent see largest single-day climb since June

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Energy sector equity prices surge

New York — Oil futures settled sharply higher Nov. 9 on the back of improved demand outlooks following reports of a breakthrough in COVID-19 vaccine research.

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NYMEX December WTI settled $3.15 higher at $40.29/b and ICE January Brent was up $2.95 at $42.40/b.

WTI climbed 8.5% and Brent was up 7.5% from their Friday settles, marking the largest single-session rally on percentage basis since May 1 and June 1, respectively.

Energy prices moved sharply higher overnight after news from Pfizer and BioNTech that their COVID-19 vaccine had shown itself to be more than 90% effective in a phase 3 trial, but gave back some of these gains amid signs that the pandemic is worsening in the near term.

Front-month WTI traded as high as $41.15/b intraday and Brent briefly touched $43.48/b ahead of the US open before steadily pulling back from these levels throughout the rest of the session.

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New York City mayor Bill DeBlasio said Nov. 9 that the city is "dangerously close" to a second wave COVID-19 pandemic that could prompt renewed lockdowns efforts in the coming days or weeks, according to media reports. The city's COVID-19 positivity rate, the ratio of positive cases to the number of tests, has averaged at 2.26% over the past seven days, health department data showed, up from an average of 1.87% over the past four weeks.

Nationwide, the seven-day moving average of new COVID-19 infections reached a fresh all-time high 106,225 on Nov. 8, accord to data from The COVID Tracking Project.

The ICE New York Harbor RBOB crack versus Brent opened to around $6/b in afternoon trading, on pace to close at the strongest since Oct. 27. Earlier in the session the spread was testing one-month highs at around $6.42/b.

NYMEX December RBOB settled 7.63 cents higher at $1.1607/gal and December ULSD was up 7.41 cents at $1.2167/gal.

"The vaccine news gave a big boost for the crude demand outlook in the long-term," OANDA senior market analyst Edward Moya said. "But the short-term view is still bleak with distribution being months away and the current spread of the virus suggesting lockdowns will be the theme for the winter."

Oil prices were still only around two-week highs following the rally, climbing back into the range seen throughout September and early October.

The contango in front-month versus year-ahead WTI futures narrowed to $2.42/b, in from $3.27/b Nov. 6.

The vaccine announcement was especially bullish for energy sector equity prices. Stock prices of US oil companies ExxonMobil, Chevron, and ConocoPhillips closed more than 11% higher while those companies with more exposure in the refining space -- Valero, Marathon, and Phillips 66 -- were up more than 20% on the day.

In contrast, the Dow Jones Industrial Average closed up around 3% while the S&P 500 was around 1% higher.