News about Covid-19 vaccine earlier last week offered a glimmer of hope and Brent crude oil rallied by over 8 percent while WTI by over 11 percent. This was the biggest single day rally since early May 2020 for crude oil as Pfizer announced that the vaccine was over 90 percent effective in preventing Covid-19. 2020 has been brutal for oil prices as earlier this year, prices nosedived to historic lows – even negative during the lockdowns in the first wave of coronavirus pandemic. Prices have since climbed to around $40 a barrel.
Besides the vaccine announcement, US election and OPEC+ intentions to deepen the production cuts further were the other factors keeping crude oil prices bullish recently. However, with the pandemic nowhere close to its end but rather gripping the world in a second wave, prices have remained range bound due to dampened demand.
And just when vaccine news was thought to be a fillip of hope for the crude market, the prices have been seen coming down again as virus continue to surge unabated across the globe including oil consuming countries. On the other hand, supply taps continue to overflow. In short, the crude oil price outlook is pessimistic.
Reports from Energy Information Administration (EIA) on the buildup of inventory shook the price rally that was witnessed due to the vaccine announcements as well as the US elections. And International Energy Agency in its latest Oil Market Report has highlighted that with a Covid-19 vaccine unlikely to ride to the rescue of the global oil market for some time, the combination of weaker demand and rising oil supply provide a difficult backdrop. This can be seen as demand is in duress as new sets of restrictions and lockdowns have welcomed winters across countries, while the vaccine availability to the masses stretched to at least mid-2021.
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