DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange vacillated between modest gains and losses on Monday as traders weighed optimism over the start of the coronavirus vaccine campaign in the United States against a slowing economy amid local and state shutdowns across major metropolitan centers aimed at flattening the second wave of coronavirus infections.

At settlement, NYMEX January West Texas Intermediate futures advanced 42 cents to a 9-month high on the spot continuous chart $46.99 barrel (bbl) and the February Brent contract on ICE settled above $50 bbl at $50.29 bbl. NYMEX January ULSD futures gained 1.75 cents to $1.4544 gallon and January RBOB futures climbed 1.14 cents to settle at $1.3191 gallon.

On Monday, the United States vaccinated the first person against COVID-19, with over 50 million doses of the Pfizer/BioNTech vaccine expected to be administrated by year's end. Should the vaccine rollout prove effective, Goldman Sachs estimates the United States and European Union would be able to vaccinate 50% of their population by April, followed by Japan and Australia by May, leading to a quick turnaround in global growth in the second half of next year.

There are other positive signals in the market. Asia's demand driven by a stronger-than-expected rebound in China's economy and successful mitigation efforts to cut though the viral spread continue to support physical markets into year's end. Based on a Bloomberg assessment, road usage in Asia is near pre-COVID levels, while European motorists are seen hitting the roads again as governments in France, the United Kingdom and Spain relax lockdown measures.

Against this bullish outlook, weak demand for transportation fuels in the United States, the world's largest oil consumer, suggests oil futures have advanced too far too quickly. Local governments from Los Angeles to New York continue to tighten quarantine restrictions in an attempt to relieve stress on hospitals that are in some areas nearing capacity. New York City Mayor Bill de Blasio warned Monday that the city could experience a "full shutdown" in coming weeks.

"We're seeing the kind of level of infection with the coronavirus we haven't seen since May and we have got to stop that momentum, or else our hospital system will be threatened," de Blasio said.

This morning, the Organization of the Petroleum Exporting Countries revised lower its demand projections for next year by 350,000 barrels per day (bpd) for an annualized growth of 5.9 million bpd due to lingering uncertainty around pandemic's impact on transportation fuels in countries part of the Organization for Economic Cooperation and Development. OPEC now sees global demand growth next year of 96.89 million bpd, up from 90.01 million bpd in 2020. However, these estimates are still lower from 99.76 million bpd demand growth seen in 2019.

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

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