Oil prices fell midweek on poor demand, ballooning oil inventories, and record-level COVID-19 infections, hospitalizations and deaths. Job formation has been disappointing, and initial weekly unemployment claims rose sharply. Moreover, Congress has been unable to agree on another federal stimulus bill. Stock markets have been volatile. Ordinarily, these bearish factors would force oil prices down. However, the market was riveted on Thursday’s announcement that the FDA’s vaccine advisory committee recommended approval of the Pfizer-BioNTech COVID-19 vaccine. Today, WTI crude futures prices opened at $46.97 a barrel, up by $1.33 from last Friday’s opening price of $45.64 a barrel. Today’s prices peaked at $47.29 a barrel, the highest prices seen since early March, nine months ago. Oil prices are easing this morning, but the week appears to be headed for a finish in the black despite the raft of weak indicators.

The U.S. Food and Drug Administration (FDA) maintains a Vaccines and Related Biological Products Advisory Committee, which voted to recommend that the FDA approve the Pfizer-BioNTech vaccine. The FDA generally follows the advice of its advisory committee, so it is anticipated that the vaccine will be approved within days. It is likely to be administered first to health-care workers and nursing home residents. The U.S. has ordered 100 million doses of the two-dose vaccine and is seeking additional doses. Reportedly, Operation Warp Speed is offering to help accelerate vaccine production by using the Defense Production Act to help Pfizer obtain additional raw materials.

The vaccine relief can come none too soon. The U.S. suffered its worst week yet with three new records for infections, deaths, and hospitalizations. According to the COVID Tracking Project, new cases in the U.S. have averaged over 206,000 per day for the past seven days. Deaths totaled 283,555 as of Thursday. Hospitalizations are at a record high of 107,258. This is the third, and worst, surge. Late-April brought a peak of 35,958 new daily cases. Mid-July brought a second peak of 76,550 new daily cases. The Johns Hopkins Coronavirus Resource Center reports that global cases of COVID-19 stand at 69,738,975, with 1,585,048 deaths. The U.S. continues to lead the world with 15,618,685 cases and 292,192 deaths.

Covid-19-US-daily-death-toll

Source: COVID Tracking Project

Unemployment claims unexpectedly headed back up last week. According to data collected by the Department of Labor, initial weekly unemployment claims jumped by 137,000 during the week ended December 5, rising to 853,000. The prior week’s figure was revised up by 4,000 to a total of 716,000. Initial weekly claims had finally subsided below the one-million mark at the end of August, but it took until mid-October before claims finally fell below 800,000. It is a worrisome development to have claims jump back above that line. Prior to the pandemic, initial claims were typically 200,000–220,000 each week. During the week of March 28, initial jobless claims skyrocketed to hit a peak of 6,867,000. During the 37 weeks since U.S. states began to issue shelter-in-place orders, approximately 70.6 million Americans have filed initial jobless claims. Last week, the November Jobs Report noted the lowest level of job formation since the COVID-19 economic recovery had begun.

WTI crude futures prices opened at $46.97 a barrel today, up by $1.33 a barrel (2.9%) from last Friday’s open of $45.64 a barrel. WTI futures prices declined on Tuesday and Wednesday this week, as demand flagged, oil inventories ballooned, and the COVID-19 pandemic raged. On Thursday, however, the FDA vaccines committee recommended approval of the first COVID-19 vaccine for use in the U.S. Prices began to rise again. WTI is trading in the range of $46.37–$47.29 a barrel currently. Prices appear to be heading for a finish in the black this week. Our weekly price review covers hourly forward prices from Friday, December 4 through Friday, December 11. Three summary charts are followed by the Price Movers This Week briefing, which provides a more thorough review.

Gasoline Prices reported by DTN Instant Market

Source: Prices as reported by DTN Instant Market

Gasoline Prices

Gasoline futures prices opened at $1.3166 a gallon today on the NYMEX, compared with $1.2625 a gallon last Friday. This was an increase of 5.41 cents (4.3%.) U.S. average retail prices for gasoline rose by 3.6 cents to average $2.156/gallon during the week ended December 7. Retail prices reclaimed the territory above $2 per gallon during the first week of June. Gasoline futures prices are retaining an unusual strength despite a major inventory addition midweek and falling demand. Contracts are trading in the range of $1.3018/gallon to $1.3265/gallon. Although prices are declining currently, the week appears to be heading for a finish in the black. The latest price is $1.3080/gallon.

 

Diesel Prices reported by DTN Instant Market

Source: Prices as reported by DTN Instant Market

Diesel Prices

Diesel opened on the NYMEX today at $1.4379/gallon, up by 4.64 cents, or 3.3%, from last Friday’s open of $1.3915/gallon. U.S. average retail prices for diesel rose by 2.4 cents per gallon during the week ended December 7 to average $2.526/gallon. Diesel prices generally have weakened this year, missing some of the price recovery seen in crude and gasoline markets, until November and early December brought a price rebound. Currently, diesel futures prices are trending down, though the week appears to be headed for a finish in the black. Contracts are trading in the range of $1.4252-$1.4497/gallon. The latest price is $1.4339/gallon.

 

Crude Prices reported by DTN Instant Market

Source: Prices as reported by DTN Instant Market

WTI Crude Prices

WTI crude futures prices opened at $46.97 a barrel today, an increase of $1.33 a barrel (2.9%) from last Friday’s open of $45.64 a barrel. Prices this week were trending down, based on rising COVID-19 cases, weak demand, swelling inventories, and rising unemployment with no sign of federal economic stimulus. Yet these bearish signals were overcome by Thursday’s news that the key FDA vaccines advisory committee recommended approval of the first COVID-19 vaccine in the U.S. Futures contracts are trading in the range of $46.37-$47.29 a barrel currently. The week appears to be headed for a finish in the black. The latest price is $46.75 a barrel.

 

PRICE MOVERS THIS WEEK: FULL BRIEFING

Oil prices fell midweek on poor demand, ballooning inventories, and rapidly rising COVID-19 hospitalizations and deaths. Job formation has been disappointing, and initial weekly unemployment claims rose sharply. Moreover, Congress has been unable to agree upon another federal stimulus bill, with two key sticking points remaining the issues of business liability and state aid. Stock markets have been volatile. Ordinarily, these bearish factors would force oil prices down. However, the market was riveted on Thursday’s announcement that the FDA’s vaccine advisory panel recommended approval of the Pfizer-BioNTech COVID-19 vaccine. Today, WTI crude futures prices opened at $46.97 a barrel, up by $1.33 from last Friday’s opening price of $45.64 a barrel. Oil prices are easing this morning, but the week appears to be headed for a finish in the black despite the weak indicators. WTI futures prices have not been at the $47-a-barrel level since early March, nine months ago.

The U.S. Food and Drug Administration (FDA) maintains a Vaccines and Related Biological Products Advisory Committee, with 20 expert members currently listed on the FDA’s roster. This committee voted (not unanimously) to recommend that the FDA approve the Pfizer-BioNTech vaccine. The FDA generally follows the advice of its advisory committee, so it is anticipated that the vaccine will be approved within days. It is likely to be administered first to health-care workers and nursing home residents. The U.S. has ordered 100 million doses of the two-dose vaccine and is seeking additional doses. Reportedly, Operation Warp Speed is offering to help accelerate vaccine production by using the Defense Production Act to help Pfizer obtain additional raw materials.

The vaccine relief can come none too soon. The U.S. suffered its worst week yet with three new records for infections, deaths, and hospitalizations. According to the COVID Tracking Project, new cases in the U.S. have averaged over 206,000 per day for the past seven days. Deaths totaled 283,555 as of Thursday. Hospitalizations are at a record high of 107,258. This is the third, and worst, surge. Late-April brought a peak of 35,958 new daily cases. Mid-July brought a second peak of 76,550 new daily cases. The Johns Hopkins Coronavirus Resource Center reports that global cases of COVID-19 stand at 69,738,975, with 1,585,048 deaths. The U.S. continues to lead the world with 15,618,685 cases and 292,192 deaths.

Covid-19-US-daily-death-toll

Source: COVID Tracking Project

Unemployment claims unexpectedly headed back up last week. According to data collected by the Department of Labor, initial weekly unemployment claims jumped by 137,000 during the week ended December 5, rising to 853,000. The prior week’s figure was revised up by 4,000 to a total of 716,000. Initial weekly claims had finally subsided below the one-million mark at the end of August, but it took until mid-October before claims finally fell below 800,000. It is a worrisome development to have claims jump back above that line. Prior to the pandemic, initial claims were typically 200,000–220,000 each week. During the week of March 28, initial jobless claims skyrocketed to hit a peak of 6,867,000. During the 37 weeks since U.S. states began to issue shelter-in-place orders, approximately 70.6 million Americans have filed initial jobless claims. Last week, the November Jobs Report noted the lowest level of job formation since the COVID-19 economic recovery had begun.

U.S. oil inventories made a large and unforeseen jump during the week ended December 4. The U.S. Energy Information Administration (EIA) reported a massive addition of 15.189 million barrels (mmbbls) to crude oil inventories. This was compounded by additions of 4.221 mmbbls to gasoline inventories, plus 5.222 mmbbls to diesel inventories. The EIA net result was a gargantuan inventory build of 24.632 mmbbls. Industry analysts had anticipated small additions to gasoline and diesel inventories but a small drawdown from crude inventories. The American Petroleum Institute (API) reported product inventory additions roughly consistent with the EIA data but with a small (1.141 mmbbl) addition to crude inventories. The official EIA data were shaped by a large increase in imported crude combined with a drop in exports.

During the worst of the oversupply, the EIA reported that crude oil in storage at Cushing rose from 35,501 barrels during the week ended January 3, 2020, to 65,446 barrels during the week ended May 1, 2020, an increase of 29,124 barrels. Cushing stocks fell to 45,582 mmbbls during the week ended June 26. However, the downward trend was reversed in July through early August, sending Cushing stocks back up to 53,289 mmbbls during the week ended August 7. Cushing stocks generally have trended up this autumn. The most recent weekly data ended December 4 showed Cushing crude stocks at 58,211 mmbbls.

During the week ended December 4, U.S. crude production remained stable at 11.1 mmbpd. According to the EIA, U.S. crude production averaged 13.025 mmbpd in February, the highest total ever. The COVID-19 pandemic forced prices down. U.S. production fell to 12.25 mmbpd in April, 11.52 mmbpd in May, and 10.9 mmbpd in June. Production in July rose to an average of 11.04 mmbpd. In August, however, production fell to an average of 10.475 mmbpd before rising to 10.575 mmbpd in September. October production averaged 10.6 mmbpd, and November production averaged 10.875 mmbpd. Along with impacts caused by the pandemic, this year’s production has varied because of record-breaking hurricanes, including Hurricanes Laura, Marco, and Zeta. So far this year, 30 named storms have formed over the Atlantic, breaking the last record of 28 storms in 2005, and making the year 2020 Atlantic hurricane season the most active one in recorded history.