Crude-oil futures headed higher on Monday, finding support after suffering from their largest weekly loss since October.
Worries over renewed lockdowns and a sluggish vaccine rollout in parts of Europe continued to dog energy markets but oil already priced in a lot of COVID worries last week with a “dramatic selloff,” said Phil Flynn, senior market analyst at The Price Futures Group. Traders are “realizing that it might not be as bad as feared.”
AstraZeneca said Monday that its COVID-19 vaccine was shown to be safe and 79% effective in preventing symptomatic disease in final-stage U.S. clinical trials. That paves the way for the vaccine to be submitted to the U.S. regulator.
Questions around the safety of the vaccine had led its suspension in parts of Europe, raising expectations for an economic slowdown what would hurt energy demand.
Still, there is “some residual pessimism in the market as Europe, instead of finally opening open, is seeing pockets of increased Covid-19 cases, forcing many European countries [to] reinstate or extend lockdowns,” wrote Louise Dickson, oil markets analyst at Rystad Energy, in a Monday research note.
“If vaccination campaigns continue to face challenges going forward, 2021 may see up to 1 million barrels of oil demand per day not recovering this year, compared with a smooth recovery scenario,” she said. “It is still early to judge and we have to see how quickly campaigns progress.”
West Texas Intermediate crude for April delivery rose 6 cents, or 0.1%, to trade at $61.48 a barrel on the New York Mercantile Exchange.
The April contract expires at the end of Monday’s session. May WTI crude, the most-actively traded contract, was trading 37 cents, or 0.6%, higher at $61.81 a barrel.
Meanwhile, May Brent crude, the global benchmark, edged up by 18 cents, or 0.3%, at $64.71 a barrel on ICE Futures Europe.
Last week, WTI crude lost 6.4%, while Brent declined by 6.8%, the largest losses since October for both benchmarks.
“Oil is likely to struggle in my view, and the downward momentum may have already started following last week’s sell-off,” said Fawad Razaqzada, market analyst at ThinkMarkets, in a market update.
He believes demand is going to improve further as more economies ease travel restrictions in the coming months, but “the impact of this will be offset to some degree by rising oil supply.”
The Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+ “will be easing supply restrictions slowly, while U.S. shale production is likely to ramp up due to the attractive oil prices again,” said Razaqzada.
Data from Baker Hughes on Friday showed that the number of active U.S. rigs drilling for oil climbed by nine to 318 this week. That was the largest weekly climb since January, implying a likely rise in future production.
“All told, I can’t see oil prices rising significantly further,” said Razaqzada, adding that he expects Brent to struggle to stay above $70 and sees WTI prices averaging around $60 per barrel in 2021.
“In the short-term, prices could correct themselves given last week’s sell-off causing a bit of technical damage,” he said.
Among the products traded on Nymex, April gasoline tacked on 1.3% to $1.97 a gallon and April heating oil rose 0.7% to $1.84 a gallon.
Natural-gas futures, however, saw the April contract inch lower by nearly 0.1% to $2.53 per million British thermal units.