Moderna vaccine announcement boosts oil

Moderna unrolls Covid vaccine

Crude prices are off to a solid start on Monday after President-elect Biden’s advisers noted a national lockdown is not on the agenda and on Moderna’s late-stage clinical trial update that raises expectations for a complete return to pre-pandemic behavior before next November.  The short-term headaches for the crude demand outlook, however, remain firmly in place.  New cases of Covid-19, hospitalizations, and deaths are still trending higher, but the rate of increase might be providing some optimism they may have peaked.  ICU capacity concerns remain and regional lockdowns appear likely and that should prevent oil prices from completely breaking out higher.

OPEC Secretary-General Barkindo also reminded energy markets that OPEC+ knows they need to be ready to respond to shifts in market conditions.  If the demand outlook takes another hit in the first quarter, no one is betting against OPEC+ from extending their production cuts a little longer.  COVID-19 vaccine optimism is sky high, with the announcements by Moderna and Pfizer, and that should help bookings for cruises and airplane flights starting in the summer.

RCEP announces huge trade bloc

Also benefiting oil prices was the announcement of the world’s largest trade bloc. The Regional Comprehensive Economic Partnership (RCEP) includes 15 countries and over 2.2 billion people, or nearly 30% of the world’s population. The mammoth trade deal should support globalization and likely lead to greater trade and thus demand for crude. The trade bloc which includes China, Japan, South Korea, Australia and New Zealand will greatly help the region’s recovery from Covid-19.

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, both of which are reporting an explosion in Covid-19 cases.

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