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U.S. crude rose 11% to $ 41.22 a barrel of relief following Pfizer’s announcement that its coronavirus vaccine is far more effective than even optimists had hoped. Oil is on track for its best day since early May.
The better-than-expected vaccine news is particularly important for the oil industry as the pandemic has caused an unprecedented collapse in demand for jet fuel and gasoline.
With Covid-19 infections on the rise in the United States and Europe, investors feared new health restrictions that would hurt economic growth and therefore demand for oil, which is the backbone of the global economy.
“Oil is rallying like a crazy thing, joining the dots between a potential vaccine and a rebound in global demand growth,” said Matt Smith, director of commodities research at ClipperData.
Brent, the world benchmark, climbed nearly 9% to $ 42.80 a barrel.
Pfizer (PFE) expects to receive more than a billion doses of its vaccine next year, CEO Albert Bourla told CNN’s Dr Sanjay Gupta on Monday.
The key is that Pfizer has said its vaccine is over 90% effective in preventing Covid-19. For context, the flu vaccine is only 40 to 60% effective. Some analysts had predicted that a coronavirus vaccine would only be 50% effective.
“It’s a great day for science. It’s a great day for humanity when you realize your vaccine is 90% effective. It’s overwhelming,” Bourla told CNBC on Monday.
For the oil industry, a vaccine would be a huge positive. Drastic lockdowns last spring contributed to the collapse in oil prices, with U.S. crude turning negative for the first time. Oil prices only rebounded after OPEC and Russia responded with record production cuts.
However, vaccine developments could take the pressure off a divided Congress to provide aid to the U.S. economy, which is slowing after a rapid summer recovery.
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