WTI hits $49.00 amid stimulus, vaccine optimism

• WTI briefly surpassed the $49.00/barrel mark on Friday and trades with gains despite equity market downside.
• Crude traders continue to focus on positive vaccine news and US fiscal stimulus optimism.

Crude oil markets are defying downside being seen across US equities on Friday, with front-month WTI futures trading higher by more than a percent and briefly even surpassing $49.00. Unlike US equity markets, which are seeing trade distorted by a few technical factors (see here), crude oil markets seem much more focused on the ongoing positive market narratives of vaccine and US fiscal stimulus optimism.

FDA set to give Moderna Covid-19 vaccine EUA

Vaccine optimism and the prospect of a return to normal life (notably, a return to pre-Covid-19 levels of jet fuel demand as people start travelling internationally again) continues to offer crude oil markets support. During Friday’s Asia session, the US FDA informed Moderna that it will rapidly work towards issuance of Emergency Use Authorization (EUA) for its Covid-19 vaccine. The FDA is expected to grant the EUA as early as Friday, and this comes after an advisory panel on Thursday recommending the FDA issue EUA.

Congress nears agreement on stimulus

A deal has not been finalised between yet, but US Senate Majority Leader Mitch McConnell was positive on the state of discussions, saying that talks on relief are making significant progress and he more optimistic now than he was last night. Meanwhile, Democrat officials are talking about the prospect that the House of Representatives could vote on a deal as soon as tomorrow and Speaker of the House (and leader of the Democrat Majority there) Nancy Pelosi has just postponed her weekly news conference for a second time on Friday. That means she is likely still in talks, and hopefully means a deal is close.

At this point, markets see the prospect of Congress agreeing on a deal and passing it into law before the end of the year as almost inevitable, and by the sounds of it this could happen as early as this weekend. This will provide a welcome boost to the US economy and thus crude oil demand, hence the continued support for crude markets.