With the coronavirus vaccine beginning to be rolled out in certain parts of the world, we can begin to look forward to a post Covid society with a little more certainty. That is, of course, unless you find yourself in the oil trading industry. One of the main sectors that have been affected by the pandemic is undoubtedly the oil industry, at a time where the market is already suffering from an immense amount of pressure. It should come as no surprise that with travelling between countries becoming almost impossible, at the virus’ peak, trading is much the same, with transit times increasing dramatically.
In December 2020, Britain became the first country to approve the coronavirus vaccine from Germany’s BioNTech and Pfizer Inc – getting ahead of the rest of the world in the race to begin an essential mass inoculation. US health regulators also approved distribution and administration of the vaccine, also eager to get their society back on track.
Without the vaccine, the current health and safety measures such as social distancing and self-isolation would inevitably be kept in place for the foreseeable future, as would the ricochet effect that this has on the oil industry.
In the early stages of the pandemic, before the development of the vaccine, oil prices fell dramatically, to the lowest levels seen since 2002. This is mostly due to the demand for crude oil collapsing – with brent crude oil falling to just £18.19 ($22.58) a barrel back in March 2020. The price of US West Texas Intermediate (WTI) also took a considerable blow, falling to $20 a barrel – an 18-year low.
With the mass roll-out of the vaccine primed and ready, 2021 oil prices in the US were expected to make a slight rise from 2020’s $41 estimate, to around $44 per barrel. If the vaccine strategy is a success, then the future of travel and tourism may begin to look a little brighter, and with it, the demand for oil will slowly increase. As supply restraints gradually ease up, energy prices are predicted to bounce back in the coming year, including natural gas and coal mining.
Despite the rise in prices at the beginning of 2021, the market took another hit last week when prices fell once again after reports of a number of elderly people passing away after receiving the vaccine, whilst coronavirus cases also continue to surge worldwide, reaching over 95 million. In fact, Political Risk and Oil Analyst, Jose Chalhoub recently told Anadolu Agency:
“Oil prices still seem to face uncertainties and will be kept under the $60 threshold as the gains they reflected last week were erased slightly on further lockdowns in Europe and Asia and rather disappointing news of vaccine results in different spots.”
However, there is some hope for the industry. Chalhoub also stated that several of the recent world events could have a positive effect on the oil market, such as US President Joe Biden’s inauguration, Libya’s continuing rise in production, the discovery of oil in the Guyana Suriname basin and the Organisation of the Petroleum Exporting Countries Plus’ (OPEC+) next moves.
The future of the oil market depends almost entirely on each country’s government’s ability to contain the coronavirus outbreak, alongside the vaccine. So far, the efforts made by OPEC+ to balance the market in 2020 has had some impressive results, so if these strategies can continue to prove beneficial this year, and the number of Covid-19 infections begins to slow down, the price of oil will stand a chance of maintaining a level of growth momentum going forward.
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