Crude oil prices ended the last trading week on a bullish note. This bullish run prevailing at the energy market is coming on the promising development of potential COVID-19 vaccines that will help to curb economic restrictions and the viral onslaught as it’s already taking its toll on the world’s global economy.
What you should know: At the end of the trading session for the week the West Texas Intermediate settled at $42.15 a barrel printing a gain of about 0.98%, while London’s based oil contract Brent crude futures gained 1.72% to settle at $44.79 a barrel.
The latest report from the world’s top oil producer, United States, reveals the number of oil rigs operating dropped to 231, the first decline in ten weeks, from 236 last week, according to data retrieved from Baker Hughes.
Such drop comes as major oil producers seek to steady output following a COVID-19 pandemic era, that has damaged energy demand/supply rebalancing at unprecedented levels.
Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics, hinted at the role of COVID-19 vaccines and OPEC+ role in the crude oil market.
“Still, we should not expect to see the same playbook for downside oil market risk that we saw with the second COVID-19 wave in Europe. Not only were the vaccine results excellent (which should soon lead to Emergency Use Authorizations), but rising cases are elevating expectations around Fed action at the upcoming 16 December meeting, when they may conduct a QE twist.
“That will do much of the oil market heavy lifting due to inactivity on the stimulus front. But it is all down to OPEC. No formal decision will be taken before the full OPEC+ ministerial meeting at the end of this month.”
Bottom line: That said, the rise in COVID-19 infections and new social mobility restrictions seen in the larger part of Western Europe, seems all but like a rubber stamp and it’s likely that an extension will be undertaken to support crude oil prices, and avoid a pullback.