Crude oil price rallies amid optimism on vaccination and upcoming OPEC+ meeting

Crude oil price rallies amid optimism on vaccination and upcoming OPEC+ meeting
Written by:
Faith Maina
November 23, 2020
  • Brent and WTI have broken out on the upside, past the $45 and $43 price levels respectively.
  • COVID-19 vaccination in the U.S. is expected to start in mid-December.
  • OPEC+ is expected to halt further tapering of oil supply cuts for the first 3 month of 2021.

Crude oil price is breaking out on the upside. Brent has moved past the $45 price level to trade at $45.78. Similarly, WTI has risen above $ 43 price level to trade at 43.03. Investors are reacting to the positive news on the possible start of coronavirus vaccination in mid-December. Besides, there is an OPEC+ meeting scheduled for early next week. Analysts expect the member states to hold on further tapering oil supply cuts for the first 3 months of 2021. 

crude oil price

Crude oil market optimistic about the start of coronavirus vaccination

There is heightened optimism that coronavirus vaccinations within the U.S. will commence in less than a month; which is good news for those looking to trade crude oil. On 18th November, Pfizer Inc. (NYSE: PFE) and BioNTech SE (NASDAQ: BNTX) announced that it had finalized the phase 3 study of its coronavirus vaccine candidate.

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On Friday, the companies filed for the authorization of the vaccine’s emergency use. Subsequently, the FDA vaccine advisory committee will hold a meeting on 10th December. Once FDA approves Pfizer’s submission, vaccination is likely to start on the next day.

While speaking about the progress of the vaccine, Moncef Slaoui, the head of White House’s Operation Warp Speed said, “Our plan is to be able to ship vaccines to the immunization sites within 24 hours from the approval, so I would expect maybe on day two after approval, on the 11th or on the 12th of December, hopefully, the first people will be immunized across the United States.”  

Slaoui has also indicated that a panel of experts will meet on 17th December regarding the Moderna vaccine. According to the U.S. government official, Moderna will file for the authorization of its vaccine’s emergency use by the end of November.

Besides, the University of Oxford’s vaccine has shown a 70% effectiveness in preventing the virus. The latter product is cheaper and is expected to reach a larger global population compare to that of Pfizer and Moderna.

The progress in COVID-19 vaccination has been received positively in the crude oil markets. Bulls forecast that the vaccines will result in heightened demand for the commodity; an aspect that has resulted in rising crude oil price.

OPEC+ is likely to hold on the further tapering of oil supply cuts

OPEC+ has a meeting scheduled on 30th November and 1st December. During this forum, the key oil-producing nations plan on review the oil output cut policy and other related strategies. OPEC+ had decided to cut back on the supply of crude oil by 9.7 million barrels per day as of 1st May. The group latter reduced the figure to 7.7 million barrels per day in August.

In the coming meeting, the countries will weigh the option of tapering the supply cuts further for the first 3 months of 2021. If the member states decide to hold on from the oil output cuts, there is likely to be a supply shortage and subsequent upsurge in crude oil price. The supply shortage could be intensified by the mounting tensions in the Middle East. On Monday, the Houthi group asserted that it had fired a missile at Saudi Aramco’s facility in Jeddah.