Oil finished higher on Monday, with prices holding above $40 a barrel, as positive trial results for a coronavirus vaccine helped to offset energy-demand concerns tied to the rise in global cases of COVID-19 above 14.5 million.
Risk appetite got a boost “on the back of news that a closely watched coronavirus vaccine being developed by the University of Oxford and AstraZeneca appeared safe and triggered an immune response in trials,” said Fawad Razaqzada, market analyst at ThinkMarkets.
Still, “over the past few weeks, crude oil prices have actually been uncharacteristically quiet, suggesting a potentially sharp move could be on the cards soon,” he said in a market update. “Hopes over improving demand conditions may keep the bulls happy.”
A medical journal published a story that found that AstraZeneca’s /zigman2/quotes/200304487/composite AZN +1.36% vaccine candidate produced antibodies in an early clinical trial.
Against that backdrop, West Texas Intermediate crude for August delivery /zigman2/quotes/211629951/delayed CL.1 -0.44% on the New York Mercantile Exchange rose 22 cents, or 0.5%, to settle at $40.81 a barrel after tapping a low of $39.83. Prices ended last week with a slight 0.1% climb. The August contract expires at the end of Tuesday’s trading session.
September Brent crude /zigman2/quotes/211756000/delayed UK:BRN.1 -0.36% on ICE Futures Europe, climbed by 14 cents, or 0.3%, at $43.28 a barrel, after the global benchmark put in a weekly decline of 0.2% on Friday.
While the early vaccine trial is clearly “good news, scientists say it is far too early to know for sure whether it is enough to offer protection,” said Razaqzada, adding that “Phase 3 trials, involving larger samples, are under way, so we shall find out in the not-too-distant future.”
The race to find a COVID-19 vaccine gathers pace, but infections “continue to accelerate in some U.S. states such as California, while Los Angeles looks to be on the brink of another lockdown,” he said.
Confirmed global deaths from the coronavirus pandemic climbed to more than 606,000, with the U.S. topping the chart with more than 140,000, according to data compiled by Johns Hopkins University. Meanwhile, North Carolina, Louisiana and Kentucky reported record case counts on Sunday, while Florida has seen an seven-day average tally of about 12,000 infections, with hot spot Arizona seeing a record high of 147 deaths.
“However, with major economies opening elsewhere, demand should pick up for oil, and more so if a vaccine becomes available soon,” said Razaqzada.
What’s more, the decision last week by the Organization of the Petroleum Exporting Countries and their allies, collectively known as OPEC+, to relax their record supply cuts starting in August was “merely doing what they had set out to do from the outset,” he said. “OPEC+ supply will still be restricted quite substantially, which could result in a balanced market sooner than expected with demand growth potentially accelerating.”
Also on the upside for prices, “crude inventories are still heading lower,” Robbie Fraser, senior commodity analyst at Schneider Electric, told MarketWatch. “From U.S. stocks to floating storage tankers, the data continues to show a market chipping away at excess supply, and that’s providing a buffer from ongoing demand concerns.”
Commodity traders were also watching efforts to roll out stimulus measures in Europe and the U.S. to help mitigate the negative effects of the viral outbreak. European Union leaders appeared close to striking a compromise on a recovery package for the trade bloc, while U.S. lawmakers were set to discuss additional aid to tackle the public-health crisis.
Meanwhile, natural-gas futures took a big hit on Monday, with the front-month August down 4.5% at $1.641 per million British thermal units, following a 4.8% decline last week.
Rising concerns over a slow economic recovery pressured natural gas along with oil. “Temperature forecasts for the Southwest U.S. turned cooler over the 6 to 10-day outlook, although the remainder of the country is still expected to receive abnormally hot weather,” said Christin Redmond, commodity analyst at Schneider Electric.
“Hotter-than-normal weather along with low gas prices has supported demand from power generators this summer,” but these gains “have been more than offset by losses from [liquefied natural gas] exports and industrial users.”
Rounding out action on Nymex Monday August gasoline edged up by 0.3% to $1.2285 a gallon and August heating oil settled at $1.2355 a gallon, up nearly 1.4%.