Commodity Weekly (November 13 2020)

This week, the main talking point in the oil markets has been Pfizer’s announcement that it has observed 90% efficacy in the trials of its Covid-19 vaccine; the corollary being that a successful vaccine allows a return to “normal.” While this is undoubtedly a significant positive, there are still a number of variables that need to be better understood before a vaccine can deemed to be a success in the general population, so the question becomes: “why so positive this week?”

The answer to this lies more in the symbolism, than immediate optimism. That a pharma company has been able to travel so far so quickly, brings the light at the end of the tunnel, that once appeared to be so far away, significantly closer, and in so doing makes it easier to “see though the cycle,” to “normality.”

Pfizer’s announcement allows the commodity markets to put a time frame on when Covid-19 is likely to undermine demand. There is an important point to make here in that the point at which “normality” is perceived to return is not when there is full vaccination coverage, but sufficient to control the spread of the disease, the so called “herd immunity” point. This is different for different diseases (95% for measles, 80% for polio), and as a Brazilian study of Manaus, could be as low as 66%.

These are interesting times, but the migration back to “normal” will be quicker than people believe.

We have received a lot of feedback regarding the weekly, which we thank you for. Following the feedback, we will migrate our publication from weekly on Friday, to weekly on Monday, the first being the 23rd of November.