Oil Jumps Above $50 on Vaccine Rollout

Proshare

ThursdayDecember 10, 2020 / 8:16 PM / By Funsho Idowu, Proshare research / Header Image Credit: BBC

 

Brent crude oil price rose above $50 per barrel (bbl) on Thursday for the first time since oil price slumped in early March, as hopes of a faster demand recovery after the release of COVID-19 vaccines underpinned a huge rise in U.S. crude inventories that showed there was still bulk supply available.

 

Chart 1Brent Crude Price Movement (Jan.-Dec. 2020)

 

Proshare Nigeria Pvt. Ltd.

Source: Bloomberg, Proshare Research

 

As of 5:09 pm (Nigerian time) on December 10th, 2020, the Oil price was trading at $50.97 per barrel, on track to settle at $51/bbl for the day. In the previous session, Brent crude firmed up by settling at $48.86/bbl while WTI closed at $45.52/bbl.  (see chart 1 below)


Chart 1WTI Price Movement (Jan.-Dec. 2020)

 

Proshare Nigeria Pvt. Ltd.

Source: Bloomberg, Proshare Research

 

Oil prices were boosted by Canada approving the Pfizer-BioNTech vaccine, joining the UK, as the second country to approve the vaccine worldwide. The United States is also waiting for approval from the U.S. Food and Drug Administration(FDA) on whether to recommend BioNTech's coronavirus vaccine for emergency use.

 

Swifter-than-expected vaccine distribution plans sent positive sentiments to the oil market despite the EIA reporting on Wednesday that there was a massive crude oil inventory build-up of 15.189 million barrels for the week to December 4. The rise in crude inventories came close to the largest crude oil build-up ever, which was recorded earlier this year for the week ending April 10, when the U.S. Energy Information Administration(EIA) reported a 19.25 million barrel stock up.

 

Ever since the first vaccine news spread, oil has recovered from historic lows reached in April 2020 when the pandemic dented demand, leaving OPEC and allies, known as OPEC plus to make record supply cutbacks.

 

Starting from January 2021, OPEC plus will further ease its supply restrictions by adding an extra 500,000 barrels per day to the global oil market, the easing is expected to be more gradual than earlier agreed, to provide additional market support.

 

A Bit of Good and Bad News For Nigeria

The good news for Nigeria is that the oil price hike would improve the external dollar earnings of the country, thereby improving Nigeria's depleted foreign reserves. The bad news is that the domestic pump price of premium motor spirit (PMS) would rise a few notches.

 

The rise in prices would be frowned at by the Oil Marketers who have kicked against a N5.00 reduction in PMS price by the Federal government, hoping this would be the right time to maximize their profit,  after deregulation of the sector.

 

Analysts note that an agreement between the Federal Government and oil marketers is imperative to determine if the rise would lead to an increase in PMS retail pump price or that the government would step in to ease the burden on drained Nigerians.

 

Proshare Nigeria Pvt. Ltd.


Related News

1.       Coronavirus Vaccine: Tailwind for Oil, Headwind for Gold

2.      Brent Oil Price Drops Below $38pp on Renewed Coronavirus Lockdowns

3.      OPEC Deal Will Offer Economic Tailwinds for SSA Oil Producers

4.      Is PMS Price Deregulation for Real or a Mirage?

5.      Oil Rallies On OPECplus Agreement - OIR 041220

6.      OPECplus Agree to Raise Oil Production

7.      Oil Prices Drop On OPECplus Uncertainty - OIR 011220

8.     Average Prices of PMS, AGO, HHK and Cooking Gas - October 2020

9.      Oil Markets See Light At The End Of The Tunnel - OIR 171120

10.  Petrol May Sell at N168 as PPMC Increases Depot Rate to N155

11.   Oil Optimism Returns on Vaccine News - OIR 101120

 

 Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP