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Covid-19 vaccine news lift oil prices

By Reuters | November 24th 2020

Oil prices rose on Monday, extending last week’s gains as traders anticipated coronavirus vaccine trials would spur a recovery in demand.

Sentiment was also bolstered by expectations that the Organisation of the Petroleum Exporting Countries (OPEC), Russia and other producers, a group known as OPEC+, would extend a deal to restrain output.

Brent crude rose Sh63 (58 US cents) to Sh4,964 ($45.54) a barrel while US West Texas Intermediate crude gained 35 cents to Sh4,662 ($42.77) a barrel.

Sustained glut

Both benchmarks jumped five per cent last week.

The contango structure in the market, whereby the prices of front-month delivery contracts are lower than those for delivery six months later, narrowed to as little as 31 US cents (Sh38), its smallest since mid-June, reflecting traders’ views a sustained glut is receding.

Outlook for demand has improved with news indicating progress towards developing Covid-19 vaccines.

A US official said the first inoculations in America could start a day or two after regulatory approval was secured.

British drugmaker AstraZeneca said yesterday its vaccine, developed along with the University of Oxford, could be around 90 per cent effective.

PVM analyst Stephen Brennock said the news was detaching sentiment from “gloomy fundamentals”.

“Investors are ignoring near-term headwinds, chief among which are surging global Covid infections, and instead looking ahead to next summer,” he said.

On the supply side, OPEC+, which meets on November 30 and December 1, will look at options to extend its deal on output cuts by at least three months from January.

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Smaller Russian oil companies are still planning to pump more crude this year, a group representing the producers said. Yemen’s Iran-aligned Houthi group said it fired a missile that struck a Saudi Aramco site in the western city of Jeddah.

There was no immediate Saudi confirmation of the claim. Aramco’s main oil facilities in are in the east.  

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