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Oil prices edge higher on vaccine news

The promising news that at least three COVID-19 vaccines look likely to be highly effective has fed into a rise in oil prices as investors begin to see light at the end tunnel for the oil industry.

British-based pharmaceutical company AstraZeneca has been the latest to announce promising preliminary results with its vaccine, which was developed in cooperation with the University of Oxford. In a one dosage regime, it was found to be 90% effective. It also has the advantages of being relatively inexpensive and storable at normal refrigeration temperatures.

Both the Brent and WTI crude benchmarks were up by around 5% on the week of the announcement, and Brent exceeded $48 per barrel.

According to Ritterbusch and Associates’ President, Jim Ritterbusch:

“Another dose of favourable coronavirus vaccine news today has prompted a renewed upswing in the equities that has easily spilled into the oil space.”

While there is still some way to go before vaccines can be produced and deployed in substantial numbers, the news provides a pathway for a quicker-than-expected recovery in oil demand. Of course, the market position remains tenuous. Stores of crude oil remain high, and a premature return to greater production by OPEC+ or US shale drillers could trigger a short-term setback.

Nevertheless, capital investment in the oil and gas industry has dropped dramatically since the pandemic began, and oil and lubricant producers like Exxon Mobil and Shell may look to invest more in hydrocarbon development again, rather than follow their competitors into large-scale renewable energy investment.

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