OIL FUTURES: Crude extends losses on pandemic concerns, pares back overnight gains
10th November 2020 08:59 GMT

0559 GMT: Crude oil futures were lower in mid-afternoon trade in Asia Nov. 10, as concerns over a second wave of the coronavirus in the US cut short hopes of any sustained recovery in oil following an overnight rally over the news of vaccine development for COVID-19.

At 1:59 pm Singapore time (0559 GMT), the ICE January Brent crude futures fell 51 cents/b (1.20%) from the Nov. 9 settle at $41.89/b, while the NYMEX December light sweet crude contract was down 64 cents/b (1.59%) at $39.65/b.

According to media reports, New Jersey Governor Phil Murphy announced restrictions on indoor dining and youth sports Nov. 9, while New York City Mayor Bill de Blasio warned the city was "dangerously close" to a second wave of the coronavirus.

These announcements raised concerns among Asian investors over the perilous state of oil recovery.

"Oil prices dropped on concerns over fuel demand in the near term. The economies of coronavirus-hit Europe and the United States are still plagued by the coronavirus. Weak demand returned to haunt the market after an overnight surge on progress towards a COVID-19 vaccine," Avtar Sandu, senior manager, commodities at Phillip Futures, said in a note Nov. 10.

Brent and WTI had surged 7.48% and 8.48%, respectively, Nov. 9 after Pfizer and BioNTech announced their COVID-19 vaccine had proven to be more than 90% effective in a phase 3 trial. However, that strength has not carried forward into Asian trading.

Furthermore, analysts warn, for all the excitement a vaccine would bring, there are still the practicalities to get out of the way first.

"Details need to be examined. Specifically, the effectiveness [of the vaccine] with different populations and overcoming some of the distribution issues -- earlier reports had suggested that the compound has to be stored at low temperatures -- should be of interest for the forward-looking market that had so far cheered the news," Pan Jingyi, market strategist at IG, said in a note Nov. 10.

Offering a concurring view, ING analysts also pointed out a certain irony in a vaccine-led rally, with the OPEC+ meeting at the end of the month.

"A widely distributed vaccine is still some distance away, which means it’s unlikely to change the demand picture in the near term. So if oil continues to rally between now and the OPEC+ meeting at the end of the month, it could prove self-defeating, as some members may grow more reluctant to roll over current cuts into next year, leaving the market vulnerable," they said in a note Nov. 10.

Market participants will look for fresh cues from the inventory report by the American Petroleum Institute and the Energy Information Administration, due later Nov. 10 and Nov. 11, respectively.

Bunkerworld .,
10th November 2020 08:59 GMT