Oil prices soar as vaccine optimism goes viral

Crude oil prices soared on Monday on the twin hopes of a vaccine against COVID-19 and concerted action by the OPEC+ alliance to keep a tight grip on oil supply.

Brent crude, the global benchmark, jumped 9 percent to more than $43 a barrel and stock markets around the world leapt amid hopes of an end to global economic lockdowns.

US pharmaceutical giant Pfizer and its German partner BioNTech said tests on more than 40,000 people indicated a 90 percent effectiveness rate of their new drug. They will pass the final hurdles for a US rollout this month, and could supply up to 50 million doses globally this year and 1.3 billion next year.

“We are a significant step closer to providing people around the world with a much-needed breakthrough to help end this global health crisis,” Pfizer chief Albert Bourla said.

Speaking at an energy conference in Abu Dhabi, Saudi Energy Minister Prince Abdul Aziz bin Salman said: “We’re hopeful that a solution to mitigate the virus in the form of a vaccine, and the spread of the vaccine availability, would be the most meaningful mitigator of the situation.”

He also held out the prospect of further action to control oil supply, which has risen recently and forced prices lower.

He gave the first official indication that Saudi Arabia and Russia, the two leading exporters in OPEC+, may alter the current supply deal.

OPEC+ is due to restore 2 million barrels of oil per day to global markets from January, but there has been speculation that it might “tweak” the timing.

“In consultation with our friends, it might be a tweak beyond what the so-called analysts are talking about,” Prince Abdul Aziz said. Some energy experts have predicted that the current level of cuts, 7.7 million barrels per day, could be maintained for a further three months.

“We are keeping flexibility in our heads and looking at the market. I will not predict, but some of those throwing predictions around may be surprised,” the minister said. Oil traders took his statement to mean that the current level of OPEC+ supply could be maintained well into next year.

Prince Abdul Aziz said that without the OPEC+ deal the oil price would be even lower, with new European lockdowns and more Libyan crude than expected coming back on the market.

He said OPEC+ could deal with extra supplies “with resilience” even if Iran were allowed to export oil again with a relaxation of sanctions by Joe Biden, who he congratulated on winning the US presidential election.

There was a need for international collaboration on climate change, the minister said, one of the priorities of the new US administration. “A lot of people see eye to eye with us on the circular carbon economy.”