Oil takes breather after vaccine rally as stockpiles rise

TOKYO: U.S. oil edged lower on Wednesday, after an industry report showed crude stockpiles in the United States rose against expectations, tempering a rally driven by news that another vaccine against COVID-19 had proved effective in trials.

West Texas Intermediate crude was down 14 cents, or 0.3%, at $ 44.77 a barrel by 0035 GMT, after rising more than 4% on Tuesday. Brent crude was yet to trade, having risen almost 4% in the previous session.

The contracts closed at their highest since early March on Tuesday, after a three-day rally pushed prices up around 8%.

“The energy sector is threatening to slam the door on (the) COVID-era struggle and ride positive vaccine economics to the next level,” said Bob Yawger, director of energy futures at Mizuho Securities.

AstraZeneca said on Monday its COVID-19 vaccine was 70% effective in trials and could be up to 90% effective, providing another weapon in the fight to control the pandemic after positive results from other major pharmaceutical developers.

Any viable vaccine is not likely to be ready for mass use in the next few months, meaning lockdowns and travel restrictions will be in place into next year.

That makes it likely that the group known as OPEC+ will continue production cuts into 2021 after a meeting set to start on Nov. 30 following technical talks this week.

The Organization of the Petroleum Export Countries (OPEC) and other producers such as Russia in the OPEC+ grouping have been withholding supplies to support prices after pandemic lockdowns earlier this year caused an evaporation in demand.

They are due to increase production by 2 million barrels per day, about 2% of global demand before the pandemic, from January.

The American Petroleum Institute, an industry association, said on Tuesday that U.S. crude stocks rose by 3.8 million barrels in the week to Nov. 20 to around 490 million barrels, against analysts’ expectations in a Reuters poll for a build of 127,000 barrels.

Official U.S. government crude inventory data will be released later on Wednesday.