Oil prices skyrocketed Monday after Pfizer revealed a vaccine breakthrough that could clear some of the black clouds hovering over the energy industry.
US crude spiked 11% to $41.22 a barrel on relief over Pfizer’s announcement that its coronavirus vaccine is way more effective than even optimists had hoped for. Oil is on track for its best day since early May.
The better-than-expected vaccine news is especially critical for the oil industry because the pandemic caused an unprecedented collapse in demand for jet fuel and gasoline.
With Covid-19 infections spiking around the United States and Europe, investors feared new health restrictions that would hurt economic growth and thus demand for oil, which is the lifeblood of the global economy.
“Oil is rallying like a mad thing, joining the dots between a potential vaccine and a rebound in global demand growth,” said Matt Smith, director of commodity research at ClipperData.
Brent crude, the world benchmark, climbed nearly 9% to $42.80 a barrel.
Pfizer (PFE) expects to have more than 1 billion doses of its vaccine next year, CEO Albert Bourla said Dr. Sanjay Gupta Monday.
The key is that Pfizer said its vaccine was more than 90% effective in preventing Covid-19. For context, the flu vaccine is just 40% to 60% effective. Some analysts had anticipated a coronavirus vaccine would only be 50% effective.
“It is a great day for science. It is a great day for humanity when you realize your vaccine has 90% effectiveness. That’s overwhelming,” Bourla told CNBC Monday.
For the oil industry, a vaccine would be a huge positive. Sweeping lockdowns last spring helped crash oil prices, with US crude going negative for the first time ever. Oil prices only rebounded after OPEC and Russia responded with record-breaking production cuts.
However, the vaccine developments could remove pressure on a divided Congress to provide aid to the US economy, which is slowing down after a speedy summer recovery.