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  • How Will COVID-19 Vaccines Affect Oil Demand?

How Will COVID-19 Vaccines Affect Oil Demand?

Dec 24 2020 Read 2112 Times

With the new COVID-19 vaccine currently being rolled out in the UK and other countries around the world, analysts are optimistic oil demand will begin to climb. The pandemic sent shockwaves through the energy industry, with travel restrictions crippling demand and upending international markets. The crisis peaked in April, when the price of West Texas Intermediate crude futures contracts suffered a historic drop of almost 300% and sunk into negative territory.

Now, developments like the Pfizer-BioNTech COVID-19 vaccine have transformed the global mood and offered hope a return to normalcy could be on the horizon. With this comes optimism that oil demand will also make a quick recovery.

New COVID strain sends markets tumbling  

While analysts remain hopeful, the latest coronavirus resurgence in the UK reflects just how delicate the market is. Following news of a new and highly infectious strain reported in the UK, oil prices rumbled as countries across Europe barred British travellers. Doctors in the United States are warning the strain has likely reached North America, while reports of the mutated virus have also been recorded in returned travellers to Australia. In response oil prices fell by more than 2% and reinforced concerns that a recovery in fuel demand may be slower than expected.  

“The new strain of the coronavirus in the UK has shown us that the vaccine optimism holding Brent above $50 per barrel could be deflated in a fleeting moment,” comments Rystad Energy analyst Louise Dickson.

OPEC+ plans disrupted

Analysts also warn the new travel restrictions will disrupt long-awaited OPEC+ plans to increase output. Senior market analyst Edward Moya says the atmosphere is “tense” and predicts oil prices will remain volatile until both Europe and the United States can control the spread of the virus.

To stabilise the market and safeguard global health Former FDA chief Dr. Scott Gottlieb says vaccine programs are critical. “As the virus continues to spread around the world, we’re going to start to see more of these variants, and that’s why it’s important to get the population vaccinated and snuff out these infections,” says Gottlieb. “The more infections you have, the more chances that these variants start to propagate.”

Volatility hasn’t stopped the energy industry from advancing in 2020, with ‘Determining Water Separation Characteristics of Aviation Turbine Fuels’ spotlighting the latest ASTM test methods.  

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