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Futures Movers: Oil climbs to a 9-month high on U.S. vaccine rollout, but OPEC’s lower demand forecast tempers the rise

Oil futures on Monday climb back to their highest finish in nine months, finding support from the U.S. COVID-19 vaccine rollout, but a lower demand outlook from OPEC tempers the price climb. Read More...

Oil futures climbed to their highest finish in nine months on Monday, finding support from the U.S. COVID-19 vaccine rollout, but a lower demand outlook from OPEC tempered the price climb.

Efforts began over the weekend to roll out the COVID-19 vaccine developed by Pfizer Inc. PFE and BioNTech SE BNTX, after its emergency authorization by the U.S. Food and Drug Administration late Friday.

“Overall optimism tied to the early stages of vaccine rollout” have been key to crude’s rise, said Robbie Fraser, manager of global research and analytics at Schneider Electric, in a note.

“While that offers a tangible reason to expect some longer-term demand and inventory normalization, the crude market will first have to confront an increasingly challenging winter,” he said. “Demand recovery, particularly in the U.S., has slowed of late as new COVID-19 cases surge,” and as a number of countries have implemented or are considering additional lockdown measures.

In a monthly report Monday, the Organization of the Petroleum Exporting Countries cut its forecast for 2021 oil-demand growth. Its lowered forecast cited “uncertainty surrounding the impact of COVID-19 and the labor market” on the outlook for transportation fuel in developed economies during the first half of next year.

OPEC cut its 2021 forecast for world oil-demand growth to 5.9 million barrels a day, down 350,000 barrels a day from its previous projection. It also pegged 2020 oil demand at 89.99 million barrels a day, a decline of 9.77 million barrels a day from 2019, slightly below its previous estimate. 

West Texas Intermediate crude for January delivery CL.1, +0.77% CLF21, +0.77% rose by 42 cents, or 0.9%, to settle at $46.99 a barrel on the New York Mercantile Exchange. February Brent crude BRN00, -0.10% BRNG21, -0.10% added 32 cents, or 0.6%, at $50.29 a barrel on ICE Futures Europe.

Both WTI and Brent crude futures marked their highest settlements since early March, according to Dow Jones Market Data.

Reports of an explosion on an oil tanker docked at the Saudi Arabian port of Jeddah also contributed support for prices Monday.

The reports of an oil tanker explosion “marks the latest in a string of disruptions often linked to Yemen’s Houthi rebels, which have received some backing from Iran,” said Fraser.

“In Iran, the country is reportedly looking at plans to quickly ramp up oil output in anticipation of a possible U.S. return to the [Joint Comprehensive Plan of Action] nuclear deal under a Biden administration,” he said.

The COVID-19 vaccine developed by Pfizer was given to the first U.S. person on Monday.

Meanwhile, a bipartisan group of Senate and House lawmakers, which has pushed for a compromise $908 billion plan, reportedly was weighing the possibility of putting $160 billion of state and local aid and liability protections into a separate package. That would leave a $748 billion aid plan that would provide $300 a week in additional state unemployment benefits for four months, $300 billion in aid to small businesses and $35 billion for health-care providers, The Wall Street Journal reported.

Still, COVID-19 cases continued to surge in the U.S. and elsewhere, with fresh lockdowns adding to worries about lower energy demand and prices.

In a note, Craig Erlam, market analyst at Oanda, pointed to “near-term downside risks as Germany goes into a more severe lockdown and the US sees record cases and fatalities, with the trajectory still in the wrong direction going into the holiday period, that could create some downside pressure in the coming weeks.”

“With OPEC+ remaining flexible though, downside risks may be more limited than we would otherwise see,” he said.

Back on Nymex, prices for petroleum products settled higher. January gasoline RBF21, +0.86% tacked on 0.9% to $1.3191 a gallon, while January heating oil HOF21, +1.19% added 1.2% to $1.4544 a gallon.

Natural gas for January delivery NGF21, +3.24% settled at $2.682 per million British thermal units, up 3.5%.

Read: Natural-gas prices look to end the year higher for the first time since 2016

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