Oil Futures Flat as Vaccine News Counters US Quarantines
WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange posted little change Tuesday as the potential for expanded lockdown measures in California and other large U.S. states countered news about the beginning of vaccination programs across Western economies this week, spurring hope that global oil demand could soon gain momentum into sustainable growth next year.
The United Kingdom vaccinated the first person against the novel coronavirus disease on Tuesday, marking a historic day in the fight against the virus that killed over 1.5 million people worldwide, shuttered economies and brought to a virtual standstill mobility across the globe.
Apart from China where effective mitigation efforts cut through the viral spread, other major economies failed to bring the pandemic under control, resorting to on-and-off-again quarantine measures and lockdowns. Germany recently extended its partial lockdown to mid-January and California enforced full-blown lockdown measures to ease the stress on local hospitals. Some 85% of California's 40 million residents now live under some form of quarantine restriction. An effective vaccine is proving to be the only viable solution for Western democracies to turn the corner in this pandemic.
On Tuesday, U.S. Food and Drug Administration said the Pfizer/BioNTech vaccine was indeed 95% effective in blocking the virus, with no concerns found that would prevent granting an Emergency Use Authorization set for later this week. The panel will review the Moderna coronavirus vaccine on Dec. 17.
Oil prices gained over 20% last month on the flow of positive vaccine news but even the most bullish forecasts suggest demand recovery won't take place until the second half of next year after mass vaccinations occur. Short-term fundamentals, in contrast, paint a bearish picture.
California's lockdown will surely erase a chunk of U.S. fuel demand, with gasoline consumption already sagging to a multi-month low 7.97 million barrels per day (bpd) during the Thanksgiving holiday week. In their Short-term Energy Outlook released Tuesday afternoon, the Energy Information Administration estimates 2020 gasoline demand would average 8.09 million bpd, down 50,000 bpd from its November forecast. The agency also revised lower its global oil demand projections in both 2020 and 2021, slashing next year's forecast by 640,000 bpd to 98.16 million bpd.
Meanwhile, U.S. crude oil stockpiles are expected to have declined from the previous week in data due out Tuesday from the American Petroleum Institute. U.S. oil inventories are projected to have fallen 1.2 million barrels (bbl) in the week ended Dec. 4, gasoline stockpiles to have increased by 2 million bbl from the previous week, and stocks of distillates to have risen by 500,000 bbl. Refinery use likely rose by 0.6% to 78.8% of capacity, according to analysts.
On the session, January West Texas Intermediate slipped 16 cents to $45.60 bbl and ICE February Brent futures finished little changed at $48.84 bbl. NYMEX January ULSD futures added 0.75 cents to $1.4067 gallon, while the January RBOB contract settled up one point at $1.2559 gallon.
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