Oil prices surged about 8% on Nov. 9, its biggest daily gain in more five months, after Pfizer announced promising results for its COVID-19 vaccine.
Brent crude settled at $42.40/bbl, up $2.95, or 7.48%, while WTI crude in the U.S. settled at $40.29/bbl, rising $3.15, or 8.48%.
Oil markets also rose after Saudi Arabia suggested it and other oil producers could adjust its current supply-cut pact, perhaps taking more barrels off the market if demand slumps in the winter as infections rise and before the vaccine is widely available.
Fuel demand is down worldwide as a result of the pandemic, and with infections now surpassing 50 million globally, numerous nations, especially in Europe, are reimposing lockdowns to slow the virus's spread. The vaccine news gave traders hope that the pandemic could be tamped down next year, which would help people resume normal life, boosting demand.
"Oil particularly reacted to the news because of what it means," said John Kilduff, partner at Again Capital in New York. "The pandemic is hitting transportation terrifically and 80% of crude oil barrels go to transportation fuel, so I think this is a logical response."
Both contracts rose more than $4 earlier in the session as traders sought to unwind bearish bets. Brent and WTI traded 148% and 139% of last session's volumes, respectively.
Pfizer said its experimental vaccine was more than 90% effective in preventing COVID-19, based on initial data, a victory in the battle against a pandemic that has forced lockdowns around the world.
The OPEC+ group, which includes OPEC and its allies, could adjust their deal to balance the market, the kingdom's energy minister Prince Abdulaziz bin Salman said.
OPEC+ is currently cutting 7.7 million bbl/d, and considering reducing those cuts to 5.7 million bbl/d from January. If OPEC+ maintains the current curbs on output, it would tighten supply and lead to higher prices.
Key members of OPEC are wary of U.S. President-elect Joe Biden relaxing measures on Iran and Venezuela, which could mean an increase in oil production that would make it harder to balance supply and demand.
"While a Biden presidency increases the likelihood of Iranian oil supply returning to the market, this is not something that will happen overnight, and we still believe it’s more likely an end of 2021/2022 event," ING said in a note.
OPEC, Russia and others, a group known as OPEC+, hold their wider talks on Dec. 1, after informal discussions of key ministers on Nov. 29 had failed to reach a consensus on oil output cuts.
After consultations on Nov. 29 failed to reach agreement, sources said Russia suggested a possibility for OPEC+ to start increasing output by 500,000 bbl/d each month from January.
OPEC and allies led by Russia have yet to find a consensus on oil output policy for 2021, after an initial round of talks on Nov. 29 and ahead of crucial meetings on Nov. 30 and Dec. 1, four OPEC+ sources told Reuters.