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First Pfizer and now Moderna have delivered a much-needed blow to the struggling oil industry, with their news of the effectiveness of vaccine candidates spiking stocks over the past week.
Pfizer news kicked off the best week ever for energy stocks, CNBC reported, and Moderna’s update marked the start of what could be another strong week, especially as it came anyway. day on which OPEC + decided to extend the current oil production cuts by three. other months, until the end of March. But how stable is the rally? This is the question investors should ask themselves.
It all hinges on the prospect of effective vaccines becoming widely available soon and on mass vaccination leading to a strong resurgence in oil demand when people start traveling again. But the study data is very early and is based on small samples of study participants. Pfizer, Moderna, and all other vaccine manufacturers need to collect more data, not just on efficacy but also on safety before starting to distribute it on a large scale.
There are also logistical challenges to the rapid distribution of large quantities of coronavirus vaccines. As noted in a recent Max Colchester and Drew Hinshaw of the Wall Street Journal relationship, previous large-scale vaccination initiatives took years to succeed. They also tended to target specific demographics, such as children.
This time there is a strong sense of urgency and the goal is to vaccinate as many people as possible, regardless of age. This means giving people sufficient doses and then encouraging them to take the vaccine. This all takes time and we are not talking about a few weeks.
Hence, oil demand will not recover significantly anytime soon, at least not in Europe and the US. It is rebounding in Asia, albeit more weakly than many hoped. And the rise of new Covid-19 cases in Europe and the United States could ultimately offset the optimism sparked by the announcements from Pfizer and Moderna.
And then there are the US elections and the renewable energy agenda to consider, especially in the long term.
“When you think about the fundamental change in how we get energy, clean energy, the emphasis that a [Joe] The Biden administration is likely to put it on this, I would see [last week’s oil stocks rally] as a cyclical trade but not a secular trend that I would like to keep as a long-term investor “, She said Nancy Tengler, chief investment officer at Laffer Tengler Investments, this week speaking to CNBC.
Related: Oil Markets See the Light at the End of the Tunnel
Indeed, there is a growing awareness of sustainability in the energy sector among investors, and this awareness pushes them to reduce or completely eliminate their exposure to oil stocks despite the allure of stable dividends. These, by the way, have proved not so stable this year thanks to the crisis, with some supermajors cutting their payments due to the drop in oil prices.
Oil stocks have always been in direct relationship to economic news. Positive news about the economy, national or global, tends to benefit oil company stocks as economic growth so far has always meant an improvement in oil demand. However, this may change in the future, due to the attention that renewables are receiving. The demand for energy will grow with the growth of economies, but not necessarily the demand for oil.
These are trends that develop more slowly than a market rally triggered by a vaccine update, following which Pfizer CEO sold it $ 5.6 million in company stock. Oil stocks are having some of their best days this year right now and there will be more rallies along the way. The important thing is that they are unlikely to last particularly, not until the oil-dependent industries begin to recover.
By Irina Slav for Oil “
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