Oil Surges as US Vaccine Rollout Boosts Growth Expectations
The European Commission, the European Union’s body responsible for coordinating vaccine supplies among the 19-nation bloc, failed miserably to deliver the doses it promised. Faced with vaccine shortages, Germany and France have only vaccinated about 2% of their populations, likely leading to extended lockdowns and more economic pain for their country’s struggling businesses. Eurostat reported Tuesday morning gross domestic product in the 19-nation economic bloc fell to a negative 0.7% in the fourth quarter 2020, raising prospects for a recession amid current weakness in the first quarter. The relative strength in German, Dutch and French manufacturing sectors has offset some of the economic damage from otherwise demand-sapping lockdowns and painfully slow rollout of the vaccine efforts.
Against this backdrop, U.S. vaccination campaign looks like a success story, with over 1.34 million vaccines being administered each day. On Monday, around 26.1 million people have received at least one dose of the two approved vaccines, a figure that essentially matches the number of Americans who have been tested positive for the virus, according to the data from the Centers for Disease Control and Prevention. This has direct implications for the value of the U.S. currency as investors flee en mass into economies that are expected to outperform the rest of the world.
Afternoon buying propelled the U.S. Dollar Index to the highest trade since early December 2020, surging 0.24% against global peers to 91.189. The relative strength in U.S. dollar capped the front-month West Texas Intermediate contact that settled at $54.76 barrel (bbl), up $1.21 on the session. International Brent crude benchmark April contact on ICE surged $1.11 to settle near 11-month spot high $57.46 bbl. The March ULSD contract on NYMEX added 2.77 cents or 1.7% to $1.6746 gallon and NYMEX RBOB March futures surged 2.59 cents to settle at $1.6160 gallon.
U.S. commercial crude oil stocks are expected to decrease modestly from the previous week in data to be released this afternoon from the American Petroleum Institute, with consensus calling for a 300,000 bbl crude draw in the week ended Jan. 29. Gasoline stockpiles are expected to rise by 900,000 bbl from the previous week, according to analysts. Stocks of distillates are expected to fall by 600,000 bbl from the previous week. Refinery run rates likely remained mostly unchanged at 81.6% of capacity.
The closely watched survey from the Energy Information Administration is scheduled for release at 10:00 a.m. EST Wednesday.
Liubov Georges can be reached at firstname.lastname@example.org