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OPEC+ Meeting looms on the Horizon as Vaccine news pushes Crude Higher

November 17, 2020

Oil prices pushed higher on Tuesday on hopes OPEC and its allies will continue with its oil production cuts for at least three months, while the mood was ignited by news of another promising coronavirus vaccine.

Brent crude futures for January rose 26 cents, or 0.6%, to $44.08 a barrel. West Texas Intermediate crude for December added 18 cents, or 0.4%, to $41.52 a barrel.

Equity markets rose in the hope of quicker economic recovery after Moderna Inc announced that its experimental COVID-19 vaccine was up to 94.5% effective in preventing infection based on interim late-state data.

Moderna’s results came after Pfizer Inc reported earlier last week that its vaccine was more than 90% effective.

OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, is set to hold a ministerial committee meeting on Tuesday that could recommend changes to production quotas when all the ministers meet on Nov. 30 and Dec. 1.

The group is leaning towards postponement of a planned January increase in oil output for at least three months to support prices as the COVID-19 pandemic continues its second wave.

In the United States, oil output from shale formations in December is expected to fall to the lowest level since June, according to the Energy Information Administration, while China’s crude oil throughput in October rose to its highest-ever level, underpinning a fast demand recovery in the world’s second-largest oil consumer.

It has been widely speculated that Oil demand in China is exceeding pre-COVID-19 levels which suggest oil demand is not permanently impaired, This is coupled with mobility data and supports the view that oil demand has not been structurally damaged by changes in behaviour post-COVID-19 for countries which emerged successfully from COVID-19.

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