Oil set for third week of gains on Covid-19 vaccine hopes

Last Updated 20 November 2020, 16:34 IST

Oil prices edged higher on Friday, on track for a third consecutive weekly rise, buoyed by successful Covid-19 vaccine trials, while renewed lockdowns in several countries to limit the spread of the coronavirus capped gains.

Brent crude futures rose 36 cents to $44.56 a barrel by 10:38 a.m. EDT (1538 GMT).

The more active U.S. West Texas Intermediate (WTI) January crude contract gained 19 cents to $42.09 a barrel. The WTI contract for December, which expires on Friday, was up 14 cents to $41.88 a barrel.

Both benchmarks are up more than 4% so far this week.

Prospects for effective Covid-19 vaccines have bolstered oil markets this week. Pfizer Inc said it will apply to U.S. health regulators on Friday for emergency use authoritization of its vaccine, the first such application in a major step toward providing protection against the new coronavirus.

"Despite the fact that in reality it will take time for a global vaccine campaign to be implemented, time during which oil demand will suffer, positive news are breaking daily about the vaccine deliveries," said Bjornar Tonhaugen, Rystad Energy's head of oil markets.

Also boosting sentiment was hope that the Organization of the Petroleum Exporting Countries (OPEC), Russia and other producers will keep crude output in check. The group, known as OPEC+, were expected to delay a planned production increase.

OPEC+, which meets on Nov. 30 and Dec. 1, is looking at options to delay by at least three months from January the tapering of their 7.7 million barrel per day (bpd) cuts by around 2 million bpd.

"An assumed roll-over of current cuts by OPEC+ to Q1 2021 is probably in today's price of $44 per barrel," Nordic bank SEB said.

Still, smaller Russian oil companies are planning to pump more crude this year despite the output deal as they have little leeway in managing the production of start-up fields, a group representing the producers said.

Oil prices were getting some support from signs of movement on a stimulus deal in Washington after U.S. Senate Republican Majority Leader Mitch McConnell agreed to resume discussions on providing more Covid-19 relief as cases surge across the United States.

Oversupply concerns, however, continue to weigh as Libya has raised production to pre-blockade levels of 1.25 million bpd.

Also, U.S. oil rigs rose 10 to 236 last week, their highest since May. This week's rig count, an early indicator of future output, is due at about 1 p.m.

(Published 20 November 2020, 16:34 IST)

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