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Oil prices have experienced a slight recovery after reports of a new vaccine by biotech giant Moderna and an announced OPEC+ meeting that may extend oil output cuts.
Oil prices edged higher on Tuesday on expectations OPEC and its allies will extend oil production cuts for at least three months, while sentiment was bolstered by news of another promising coronavirus vaccine. Prices found support after news that the Organization of the Petroleum Exporting Countries and Russia, known as OPEC+, were moving closer to a compromise on extending oil output cuts and were discussing rolling over the curbs one to two months.
Equity markets rose on hopes of quicker economic recovery after Moderna Inc MRNA.O said its experimental COVID-19 vaccine was 94.5% effective in preventing infection based on interim late-state data. This comes after Pfizer Inc. PFE.N reported last week that its vaccine was more than 90% effective.
“If we judge economic recovery, particularly through the lens of oil markets... with multiple high efficacy vaccines in the pipeline, there is good chance mobility will return close to pre-pandemic levels later in 2021,” said Stephen Innes, chief global markets strategist at the axis in a note.
OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, is set to hold a ministerial committee meeting on Tuesday that could recommend changes to production quotas ministers meet on Nov. 30 and Dec. 1. According to sources who spoke to Reuters on Monday, the group is leaning towards postponement of a planned January increase in oil output for at least three months to support prices as the COVID-19 pandemic continues its second wave.
In October, China’s crude oil processing rose to its highest-ever level, underpinning a fast demand recovery in the world’s second-largest oil consumer.
“Oil demand in China is exceeding pre-COVID-19 levels, which suggests oil demand is not permanently impaired,” analysts from Bernstein Energy said.
“This is in line with mobility data and supports the view that oil demand has not been structurally damaged by changes in behavior post-COVID-19 for countries which emerged successfully from COVID-19.”