Oil Futures End Higher, Fade Gains on J&J Vaccine Debacle

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Moving off intrasession highs, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Tuesday's session modestly higher despite growing concerns an unexpected setback in the rollout of Johnson & Johnson COVID-19 vaccine would potentially delay reopening of the global economy and recovery in fuel demand until later this year.

Tuesday morning, U.S. health regulators recommended a pause in the use of J&J's vaccine after 6.8 million people in the United States had received the single-shot inoculation while they investigate six cases of blood clots in women ages 18 to 48 that are considered rare. Immediately following the statement, the company halted the rollout of its vaccine in the European Union and elsewhere, adding "the safety and well being of the people who use our products is our number one priority."

The European Commission is now seeking "urgent clarification" from J&J's "unexpected decision" to delay deployment of nearly 200 million doses scheduled for this year. Last week, the commission revised higher its forecast for European Union immunization targets based, in part, on 55 million J&J vaccine doses contracted by the EU for the second quarter.

The worrisome development is, however, unlikely to derail an expected recovery in global oil demand, with Moderna and Pfizer vaccines seen filling the supply gap, but those expectations could be delayed until later in the year.

Markets will keep a close eye on any changes in vaccination rates in the U.S. and EU along with updated statements from health officials. As of Tuesday, U.S. vaccination rate stood at 3.38 million doses a day, with close to 200 million doses having been administered so far.

Separately, the Organization of the Petroleum Exporting Countries this morning released its Monthly Oil Market Report revising higher its 2021 global oil demand projections by 100,000 barrels per day (bpd) to 96.5 million bpd. The upward revision boosts expected annual growth this year to 6 million bpd following a 5.6 million bpd year-on-year decline in 2020, with OPEC citing stimulus programs, easing of COVID-19 restrictions, and accelerated vaccine programs for their rationale in boosting the demand outlook.

Tuesday afternoon, traders also positioned ahead of the weekly release of inventory reports from the American Petroleum Institute and U.S. Energy Information Administration. Analysts expect crude stockpiles to have fallen 2.5 million barrels (bbl) in the week ended April 9 after inventories declined 3.5 million bbl in the previous week. Stocks of distillates are seen to have risen by 1.1 million bbl last week.

Gasoline stockpiles are expected to have risen by a modest 300,000 bbl from the previous week, according to analysts. DTN internal data shows gasoline demand in the reviewed week averaged just 0.4% below 2019 levels.

On the session, May West Texas Intermediate futures climbed 48 cents to settle at $60.18 bbl and the June Brent contract on ICE added 39 cents to $63.67 bbl. NYMEX May ULSD futures gained 0.65 cents to $1.8145 gallon and May RBOB futures added 0.57 cents to $1.9757 gallon.

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

Liubov Georges