The GERM Report

-Another day, another vaccine-related bounce.

-Consumer-driven demand continues to decline.

Crude oil prices showed something of a disconnect in Wednesday trading, bouncing higher on reports of a vaccine for COVID-19 that isn’t in distribution yet. Vaccine hopes are giving investors an incentive to move back in to some of the riskier assets, leaving the US dollar on its backfoot and thereby stimulating the price of oil. And the market seems to expect that OPEC won’t relax anytime soon, pushing futures contracts higher. But back in today’s world, however, the news was broadly negative, with US Federal Reserve officials warning of the economic harm from the pandemic.

The price for Brent crude oil is up some 4% on the week. On Tuesday, we saw US crude break out of a triangle pattern to bust higher, a trend that continued into the Wednesday session. By 2:36 p.m. ET, Brent was up some 1.6% to trade at $44.44 per barrel.

Drug maker Pfizer and German biotechnology company BioNTech on Wednesday revealed results from Phase 3 clinical trials that found its vaccine was 95% effective in preventing COVID-19 in patients without prior exposure.

“Our objective from the very beginning was to design and develop a vaccine that would generate rapid and potent protection against COVID-19 with a benign tolerability profile across all ages,” said Ugur Sahin, the CEO and co-founder of BioNTech.

That brings a collective sigh of relief, giving investors cause to move into riskier assets. Gold was down about a half percent on Wednesday. Pfizer said it would seek emergency-use authorization from federal U.S. officials in a matter of days. In their joint statement, they said they expected they could produce 50 million vaccine doses this year and another 1.3 billion by the end of 2021.

By the end of 2021. That means we could be facing an incredibly rough ride over the next several months. Speaking at a virtual event for the Society for Advancing Business Editing and Writing, New York Federal Reserve Chief John Williams said he was modestly optimistic, but noted there would be economic pain if the COVID pandemic continues its strength.

Demand is already a factor, particularly with mobility restrictions in place. The US Energy Information Administration on Wednesday reported that petroleum products supplied over the last four-week period, a proxy for demand, was down 9.1% from the same period last year. If this were a normal year, we’d start to see product demand increase as would-be holiday goers make their travel plans. Air travel is even worse. Air France-KLM said recently that passenger levels during the third quarter were off some 70% compared with last year.

On the geopolitical front, we continue to see President Donald Trump check off his to-do list before he leaves office in January. This week, it looked like Trump was orchestrating an attack on Iran. And on Wednesday, his administration imposed sanctions on a foundation controlled by Iran’s Supreme Leader Ayatollah Ali Khamanei and dozens of other top officials. That could be a relatively moot point, however. If President-elect Joe Biden lifts sanctions on Iran when he gets to the White House, Iran said it was immediately return to the nuclear commitments outlined in a multi-lateral agreement, though it has continued to conduct research into nuclear enrichment.