Oil prices jumped more than 4 percent on Monday after Moderna Inc reported its experimental vaccine was 94.5 percent effective in preventing COVID-19 and as OPEC+ members mull the possibility of extending output cuts to next year.
Global benchmark Brent crude for January delivery rose $1.79 or 4.2 percent to $44.57 a barrel on Monday, while US benchmark West Texas Intermediate (WTI) crude for December delivery rose $1.84 or nearly 4.6 percent to $41.97.
“Vaccine euphoria has already been priced in heavily since last week, but a second remedy to COVID-19 shows that a large-scale vaccination programme, with sufficient amounts for the global population, is somewhat closer now,” said Rystad Energy analyst Louise Dickson.
The announcement by Moderna comes after Pfizer Inc reported last week that its vaccine was more than 90 percent effective, raising hopes that the pandemic-driven damage to the global economy could be reduced.
But analysts remain wary about the short-term optimism.
“Vaccine news, which are rightly received as positive in the long term, do not mitigate the risk that the US and other major oil-consuming centres will likely have to return to some form of lockdown in the very short term,” Dickson added.
Prices on Monday were also buoyed by data showing a rebound in China and Japan, with figures showing that Chinese refineries processed record daily levels of crude in October.
Both WTI and Brent gained more than 8 percent last week on hopes of a vaccine and expectation that the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia, a grouping known as OPEC+, would maintain lower output next year to support prices.
OPEC+ discussed weaker compliance with pledged oil output cuts on Monday and weighed further action to support the market as the second wave of coronavirus hits demand.
The group has been cutting production by about 7.7 million barrels per day (bpd), with compliance seen at 96 percent in October. It had planned to increase the output by 2 million bpd from January.
But, with demand for fuel weakening, the grouping has been considering delaying that increase or even making further cuts.
An option gaining support among OPEC+ is keeping the existing supply curbs of 7.7 million bpd for another three to six months, OPEC+ sources said, rather than tapering the cut to 5.7 million bpd in January as currently called for.
OPEC+ is set to hold a ministerial committee meeting on Tuesday that could recommend changes to production quotas when all the ministers meet on November 30 and December 1.
“There is no denying that the oil market is fully in the hands of OPEC+,” said SEB chief commodity analyst Bjarne Schieldrop. “The organisation is the only reason why oil prices today are not $20 a barrel. As such, their upcoming meeting on November 30 to December 1 is no less hugely important.”