U.S. West Texas Intermediate crude oil futures closed higher on Friday as investors showed no signs of lightening up on the long side ahead of the weekend and next week’s holiday-shortened week. The market is currently trading at its highest level since March 3 as traders shrugged off negative future demand news throughout the week and instead focused on the optimism created by the roll out of the coronavirus vaccines and hopes for a new fiscal stimulus deal. A weaker U.S. Dollar, which fell to more than a 2-1/2 year low also drove up demand for the dollar-denominated commodity.

Vaccination Campaign Kicks-Off, but Pandemic Concerns Linger

The United States kicked off its vaccination campaign against COVID-19, buoying hopes that pandemic restrictions could end soon and lift demand at the world’s largest oil consumer. Major European countries continued in lockdown mode to curb the spread of COVID-19 which has reduced fuel demand. For example, Germany, the fourth-largest economy in the world, plans to impose stricter lockdowns from Wednesday to battle the virus. “While the market has been buoyed by the rollout of COVID-19 vaccines, a path towards normalization of demand remains a difficult one,” ANZ analysts said in a note.

COVID-19 Impact

More than 73.65 million people have been reported to be infected by the coronavirus globally and 1,654,920 have died, according to a Reuters tally on Friday. The spike in cases is leading to tough restrictions on travel, impacting fuel demand and any economic recovery.

OPEC Cuts 2021 Oil Demand Outlook Again as Pandemic Impact Lingers

The lingering impact of the COVID-19 pandemic is hampering efforts by OPEC and its allies to support the market, leading OPEC to warn that the rebound in demand in 2021 will be slower than expected. Demand will rise by 5.90 million barrels per day (bpd) next year to 95.89 million bpd, OPEC said in a monthly report. The growth forecast is 350,000 bpd less than expected a month ago. The cartel has steadily lowered its 2021 demand growth forecast in recent months.

Vaccine Impact on Moribund Oil Demand is Several Months Away – IEA

The roll-out of vaccines this month to combat the coronavirus pandemic will not quickly reverse the destruction wrought on global oil demand, International Energy Agency (IEA) warned on Tuesday. “The understandable euphoria around the start of vaccination programs partly explains higher prices but it will be several months before we reach a critical mass of vaccinated, economically active people and thus see an impact on oil demand,” the IEA said in its monthly report. “In the meantime, the end of year holiday season will soon be upon us with the risk of another surge in COVID-19 cases and the possibility of yet more confinement measures.”

Pressure Could Be Building on OPEC

ANZ Research said with U.S. COVID-19 infections hitting new daily records, and restrictions tightening in Japan, pressure is growing on the Organization of the Petroleum Exporting Countries (OPEC), Russia and their allies, together called OPEC+.OPEC+ plans to add 500,000 barrels per day of supply in January, in a first step toward a 2 million bpd target.

Brent Crude hit $50 a barrel on Thursday morning for the first time since oil prices crashed in early March, as hopes of swifter-than-thought vaccine rollout fueled bullish expectations of strengthening oil demand early next year.

As of 10:35 a.m. ET, Brent Crude was rallying by 3.56 percent at $50.60. The price of Brent reached the $50 a barrel threshold for the first time since the first days March, when Saudi Arabia and Russia broke up the previous OPEC+ pact, contributing to massive slides in oil prices exacerbated by the demand crash in the lock downs in the spring. The WTI Crude price also hit its highest level since the price crash, and traded at $47.23, up by 3.82 percent on the day.

Oil prices were boosted by Canada approving the Pfizer-BioNTech vaccine, joining the UK. Canada’s health authorities approved on Wednesday the vaccine, and the first doses of the vaccine are expected by the end of this year. The UK has already started vaccinating vulnerable people and essential personnel, and the first person in the UK received the Pfizer vaccine on Tuesday. Hopes of faster-than-expected vaccine releases turned the oil market sentiment bullish on Thursday, even after the EIA reported on Wednesday a massive crude oil inventory build of 15.189 million barrels for the week to December 4. This rise in crude inventories came close to the largest crude build ever, which was recorded earlier this year for the week ending April 10, when the EIA reported a 19.25 million barrel inventory build.

On Thursday, the market was already ignoring the massive build last week, due to the vaccine hopes and signs that oil demand in Asia continues to recover and be a bright spot on the market. Indian Oil Corp, the biggest refiner in the world’s third-largest oil importer, said its refineries operated at 100% capacity in November, for the first time since the pandemic started, in order to meet growing domestic fuel demand.