During Tuesday’s early Asian trading session, the WTI Crude Oil prices witnessed some aggressive short-covering bullish moves, climbing close to 3-week highs, above the $40.00 level, in the wake of the latest optimism over a potential vaccine for the highly infectious coronavirus. The COVID-19 vaccine hopes were fueled instantly after Pfizer announced that its experimental vaccine was more than 90% efficient in stopping COVID-19. This, in turn, provided a boost to the already upbeat market sentiment, contributing to the gains in crude. Moreover, the upticks on the equity market were further bolstered by Joe Biden’s victory in the US presidential elections, which favored more stimulus.
Furthermore, the sentiment around crude oil improved further after the Russian Deputy Energy Minister, Pavel Sorokin, announced that they expect the global fuel demand to return to 100 million barrels per day (BPD) in the coming 2-to-3 years. On the bearish side, the concerns about the escalation of the COVID-19 pandemic in the US and Europe, which keeps fueling the doubts over the recovery of the oil demand, have become a key factor that is keeping a lid on any additional gains in the crude oil prices. Meanwhile, the strength of the broad-based US dollar was also seen as one of the key factors that limited the gains in crude oil prices, as the price of oil is inversely related to the price of the US dollar. WTI Crude Oil is currently trading at 40.30, and consolidating in the range between 37.17 and 41.33.
While discussing the bullish side of the story, the renewed optimism over a possible vaccine for the highly infectious coronavirus boosted the market risk tone, which remained supportive of risk-sensitive oil. These hopes were boosted after Pfizer (NYSE: PFE), and its German partner BioNtech (NASDAQ: BNTX) obtained positive results in over 90% of patients in a late-stage coronavirus vaccine trial. It is also worth mentioning that the companies expect to distribute 1.3 billion doses of the vaccine in 2021. Thus, the news boosted the already strong global risk sentiment, backed by Democratic candidate Joe Biden’s victory in a nail-biting 2020 presidential election.
Across the pond, the oil prices were further bolstered by the latest optimism concerning Brexit, which was recently boosted after the European Union’s (EU) Brexit negotiator Michel Barnier said that he is very optimistic about the upcoming Brexit talks.
Despite the risk-on market sentiment, the broad-based US dollar succeeded in stopping its overnight negative traction, edging higher on the day, mainly due to the on-going upsurge in the US Treasury bond yields, which rose, helping the greenback to put some bids against its rivals. However, the modest gains in the US dollar turned out to be a major factor that capped the further upside momentum for the crude oil prices, as the price of oil is inversely related to the price of the US dollar. Meanwhile, at 92.692, the US Dollar Index is currently up by 0.7% on the day.
Elsewhere, the crude oil gains were capped by the on-going doubts over the global economic recovery in the wake of intensifying coronavirus (COVID-19) worries in the US and Europe. As per the latest report, the number of coronavirus (COVID-19) cases has crossed the 10 million mark in the US and the 30 million mark in Europe. As a result, many economic activities in major EU states and the UK have been stopped. The International Energy Administration (IEA) Director for Energy Markets and Security says that fresh lockdown measures imposed in Europe to stop the COVID-19 contagion would lower the global oil demand outlook, which has put the brakes on the additional upside momentum for the crude oil prices.