Crude futures are soaring following surprising news from Pfizer and German partner BioNTech about promising results from its COVID-19-vaccine program.
According to the companies, a vaccine candidate was found to be more than 90% effective in preventing COVID-19 in participants without evidence of prior SARS-CoV-2 infection in the first interim efficacy analysis.
Oil prices are reacting violently positive, jumping nearly 10%, as the market is pricing in the possibility of a quicker rollout of a global vaccine, exacerbated by a large amount of short positions which needs to be covered when prices start soaring.
“In the eyes of traders, a vaccine will help ensure no future lockdowns are needed and will bring people back to the streets, allowing road and air transport to recover,” said Bjornar Tonhaugen, Head of Oil Markets at Rystad Energy, “Essentially a vaccine is a bullish sign against COVID-19 pessimism. The pandemic is what keeps oil demand from recovering and this is clearly positive news for the market.”
However, Tonhaugen said, the violent price reaction will likely reverse soon as the market realizes the near-term impacts on oil demand will be non-existent as a vaccine rollout timeline is uncertain.
“The reality is that the timing of a global roll-out of any vaccine is further down the road than some believe, so it will take a long time to apply it to the global population.” The news is indeed bullish, but mostly on a longer-term prospect, he said. “It does, though, give a sense of how severely impacted oil markets are by the coronavirus restrictions, as the market will look to digest more details about the trial results.”
“We recommend patience as the news of a vaccine are likely currently taken by the market with an extra grain of bullish sentiment. Pfizer may have been sitting on this ‘good market news’ for some time, gingerly awaiting US election results before going public.”
If Moderna comes out with a similar statement this week, it could tee up two COVID-19 vaccines in the US by yearend, he said, but warned, the "fast-tracking of multiple vaccines doesn’t mitigate the risk that many US states will have to return to some form of lockdown this autumn/winter—immunity doesn’t arrive the day the vaccine is released, it takes months.”
