DTN Oil

WASHINGTON (DTN) -- Oil futures nearest to delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange continued higher for a second straight session Tuesday, lifting the December West Texas Intermediate contract to the highest settlement in three weeks. The gains came on a combination of positive vaccine news from Pfizer and BioNtech and increased bets for the Organization of the Petroleum Exporting Countries to deepen production cuts early next year, offsetting demand destruction caused by European lockdowns.

In its Short-term Energy Outlook released Tuesday afternoon, the U.S. Energy Information Administration downgraded its estimates for demand growth next year to 98.8 million barrels per day (bpd), driven by deteriorating fuel consumption in countries that are part of the Organization for Economic Cooperation and Development. OECD collectively account for over 40 million bpd in global oil demand, with private forecasts suggesting at least 2 million bpd of demand would be erased in the fourth quarter.

Traffic volumes in the United States, Germany and France this week fell below the Jan. 13 baseline for the first time since spring lockdowns were lifted six months ago.

In Germany, Eurozone's largest economy, business sentiment declined in early November to April lows with a 39 reading, according to the survey from the Mannheim-based Centre for European Economic Research (ZEW).

The United States and European countries continue to report a record surge in new COVID-19 infections even after the reintroduction of quarantine measures.

Regardless of the near-term demand outlook, oil futures continued to push higher Tuesday, buoyed by encouraging news on vaccine development from Pfizer and BioNtech announced Monday morning, with the drug makers on track to earn Emergency Use Authorizations from the U.S. Federal Drug Administration by the third week of November.

Further bolstering prices, OPEC+ is ready to adjust production quotas before the arrival of the vaccine, according to Saudi Arabian Energy Minister Prince Abdulaziz bin Salman, indicating the adjustment would be more than a "tweak" during an interview on Monday.

EIA on Tuesday revised its outlook for OPEC crude production by more than 400,000 bpd from October to 33.5 million bpd next year.

Tuesday afternoon, oil traders also positioned ahead of weekly inventory data from the American Petroleum Institute due out 4:30 p.m. EST. Analysts expect commercial crude-oil supplies to have decreased by about 700,000 barrels (bbl) during the week ended Nov. 6 after falling 8 million bbl in the week prior, with the refinery run rates seen to have increased by 0.5%. Gasoline inventories are expected to have fallen 1.1 million bbl and distillate inventories to have declined by 1.7 million bbl.

On the session, December WTI futures added more than $1 to $41.36 per bbl and the ICE January Brent contract advanced $1.21 to $43.61 bbl. NYMEX December ULSD futures surged 3.58 cents to $1.2525 per gallon, and December RBOB futures gained more than 3 cents to settle at $1.1941 per gallon.

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

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