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  • Wednesday was a strong day for crude oil markets, with focus on bullish demand-side factors.
  • WTI moved back to fresh cycle highs in the mid-$63.00s, as focus turns increasingly to OPEC+.

Front-month futures contracts for the American benchmark for sweet light crude oil, West Texas Intermediary (or WTI), rallied into the close of US equity market trade to hit fresh cycle highs of just shy of the $63.50 mark. Futures trade paused at 22:00GMT, as it does every evening, ending the session $2.26 or around 3.6% higher and will reopen at 23:00GMT.

More upside is likely given the latest vaccine news; according to a study published in NEJM, Pfizer’s Covid-19 vaccine has been 92% effective against severe cases of Covdi-19 after two doses and 94% effective in preventing symptomatic cases after two doses so far in Israel’s nationwide vaccination programme. This news follows a string of similar reports that suggest with equal confidence that vaccines work in preventing severe disease, including one report out of the UK that showed the AstraZeneca vaccine reducing transmission by a significant proportion.

Prior to the latest vaccine news, crude oil markets had already been in a bullish mood; Fed officials spent the day reassuring markets that policy will remain ultra-accommodative until the Fed has reached its goals, which it sees itself as a very long way off from and markets continue to expect another big boost to the US economy in the form of further fiscal stimulus; Democrat leaders hope to get US President Joe Biden’s $1.9T stimulus package passed into law before mid-March. Meanwhile, markets continue to bet on global lockdown easing and the subsequent rapid economic recovery.  

Supply-side factors have been out of focus for the most part since last week’s weather-related disruptions to US crude output. Wednesday’s weekly inventory report was distorted by this and was thus difficult to interpret, but crude oil markets seemed to respond positively to the observed large drop in average daily US output. Elsewhere, OPEC+ sources, cited by Reuters, said that the cartel is weighing a 500k barrel per day boost to output from April, with the Saudi Arabians expected to end their voluntary 1M barrel per day in cuts at the start of that month. However, according to the sources, some in OPEC+ are urging the group to hold output steady if the Saudi Arabians opt to end the entire of their 1M in cuts from April. With OPEC+ meeting next week, this is a theme that will start to garner increasing amounts of attention in the coming days.

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