Oil Futures Rally on Vaccine Progress

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Crude and petroleum product futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange charged higher in afternoon trade Monday, lifting front-month West Texas Intermediate to the highest settlement in three months. The gains followed stronger-than-expected readings on domestic manufacturing activity in November while broader optimism over the successful development of a third coronavirus vaccine further boosted gains for the complex.

On the session, NYMEX January WTI futures jumped 64 cents to settle at $43.06 per barrel (bbl) and ICE January Brent futures gained more than $1 to settle at $46.06 per bbl. NYMEX December ULSD futures surged 2.42 cents, reaching a $1.3105 8-1/2-month settlement high on the spot continuous chart, and December RBOB futures added 2.88 cents to finish at $1.2040 per gallon.

The U.S. dollar index, which tracks the greenback against a basket of six global currencies, erased earlier losses to finish at 92.494 after U.S. Purchasing Managers' Index for November came above expectations at 57.9 reading, with business activity across service sectors showing surprising resiliency despite tightening quarantine restrictions and surging coronavirus cases.

Furthermore, the recent rise in infections seemed to fall short on Americans canceling their travel plans for the Thanksgiving holiday, with data from the Transportation Security Administration showing more than 3 million passengers passing through U.S. airport checkpoints last weekend. On Sunday alone, 1,047,934 fliers traveled through U.S. airports, marking the busiest travel day since March when alarms were first sounded over coronavirus.

The recent data follows warnings from the Centers of Disease Control to avoid traveling for holidays this year due to the risk of transmitting the disease from one part of the country to another.

The apparent fatigue is also taking hold in some European countries that have lived under stringent lockdown restrictions since early October. Governments in the European Union announced this weekend step-by-step easing of quarantine measures as early as next week to mitigate the adverse impact to local economies in the region already hard hit by the pandemic. Overnight data out of the EU showed business activity across service sectors slumped to April's low 41 amid reclosures of nonessential retail stores and restaurants.

The United Kingdom, France and Germany are among the countries where lockdowns are due to expire in early December, with Britain's Health Secretary Matt Hancock suggesting Sunday more localized and targeted approach toward controlling the virus would be favored.

"We could be back to normal sometime after Easter next year," said Hancock.

Underlining this optimism, the latest announcement from UK pharmaceutical group AstraZeneca developed in collaboration with Oxford University showed their COVID-19 vaccine proved 90% effective in blocking the virus following a series of Phase 3 trials. AstraZeneca's vaccine can be stored in the refrigerator as opposed to vaccines from Moderna and Pfizer that require storage in very low sub-zero temperatures, making it a more viable option for developing countries. Furthermore, the company said it could produce up to 3 billion doses in 2021 versus 1.3 billion for Pfizer and 500 million to 1 billion for Moderna.

Government in the EU and U.S. all announced plans for vaccine distribution mid-December, with likely priority given to first responders and people in high-risk groups.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges