WTI, Brent at 9-Month High on Expected Gains in Global Demand

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Erasing losses since the coronavirus pandemic first shuttered the U.S. economy in the first quarter, West Texas Intermediate futures on the New York Mercantile and the Brent contract on the Intercontinental Exchange on Tuesday rallied to their highest settlements since early March. Traders are looking past a recent surge in COVID-19 infections to an anticipated recovery in global oil demand on optimism for the rapid distribution of three coronavirus vaccines early next year.

On the session, NYMEX January WTI futures soared $1.85 or more than 4% for a $4.91 barrel (bbl) settlement and ICE January Brent futures rallied to a $47.86 nearly 9-month spot high. NYMEX December ULSD futures surged to a fresh nearly 9-month high at $1.3595 gallon, while the December RBOB contract gained 5.42 cents or 4.3% to $1.2582 gallon.

Tuesday's explosive rally came on the back of promising vaccine news from three leading pharmaceutical companies and their partners this month, although most forecasts suggest a meaningful recovery in global oil demand is likely to be delayed until the second half of next year.

Still, investors seemed to look past the market's poor short-term fundamentals and toward future gains in global demand. The jubilant sentiment was in part spurred by a slew of announcements from top U.S. and EU health officials this week suggesting preparations for large-scale vaccination programs are already underway and might start as early as next month. Germany announced its nationwide plan to redistribute its first doses of the vaccine in the final weeks of December, while announcing gradual easing of lockdown restrictions beginning next week. In the United Kingdom, the stringent quarantine restrictions will be allowed to expire on Dec. 2, replaced with more targeted measures.

"We may go back to the sense of normalcy sometime after Easter," said UK Health Minister Matt Hancock.

Also driving the advance, President Donald Trump late Monday agreed to begin the transition to a Biden administration with the latter now receiving official Operation Warp Speed briefings, which will clear potential delays in implementing the nationwide vaccination program. U.S. plans to begin distribution of the coronavirus vaccine on Dec. 11.

With investors cheering de-escalation of political tensions in Washington and upbeat news on vaccine development, equity markets made a historic leap forward on Tuesday, with the Dow Jones Industrial Average closing above 30,000 for the first time and S&P 500 Index also reached a fresh record high. Trump, speaking at the White House, called the level a "sacred number."

Separately, U.S. crude oil stockpiles are expected to remain unchanged from the previous week in data due Tuesday from the American Petroleum Institute, with gasoline supply seen rising 800,000 bbl and distillate inventories falling by 1.5 million bbl from the previous week. The Energy Information Administration is scheduled to release its official supply data at 10:30 a.m. EST on Wednesday.

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

Liubov Georges