Tanker explosion pushes oil past $50 on Middle East stability concerns

(Bloomberg) --Oil climbed past $50 a barrel after another tanker explosion in the Middle East raised concerns over the region’s stability, and as the first Covid-19 vaccine was poised to be distributed across the U.S.

Futures rose as much as 1.7% in London. The explosion, at the Saudi Arabian port of Jeddah, comes three weeks after an oil tanker was damaged in a possible attack at the Saudi terminal of Shuqaiq. While the attack is small, it symbolizes a wider geopolitical risk that could impact energy in the region.

There was also optimism in the U.S. as first deliveries of the Pfizer Inc.-BioNTech SE vaccine will be made Monday, after the drug gained emergency authorization last week. At the same time, the dollar weakened, boosting commodities priced in the currency.

Oil is up more than 30% since the end of October amid vaccine breakthroughs and an OPEC+ compromise deal on production. Iran, meanwhile, plans to almost double output in the next year in anticipation of a loosening of sanctions after Joe Biden becomes president.

“While risk assets, including oil, are looking to position for a recovery trade with the deployment of a Covid-19 vaccine, the explosion of a tanker off Jeddah is reminder that condition in Gulf are subject to geopolitical risk,” said Harry Tchilinguirian, oil strategist at BNP Paribas.

Prices:

• Brent for February settlement advanced 0.9% to $50.44 a barrel at 10:18 a.m. London time
• West Texas Intermediate for January delivery rose 45 cents to $47.02

There are still signs that physical oil markets remain robust. Oman crude on the Dubai Mercantile Exchange is trading in backwardation -- where nearby contracts are more expensive than later ones -- indicating tight supplies. Indian Oil Corp. was snapping up cargoes last week, while a unit of China’s Rongsheng Petrochemical is seeking barrels for March delivery.

While parts of Asia have rebounded strongly from the virus-led crash and there are signs global demand is picking up after a November trough, the outbreak is continuing to dent consumption in some nations. South Korea is considering stricter social-distancing measures and Germany will enter a hard lockdown from Wednesday, which will last until at least Jan. 10.

Other oil-market news:

• Bank of China Ltd. has sued BP Plc in Singapore over its alleged role in fabricating oil deals with collapsed trader Hin Leong, in the latest effort by a creditor to recover losses after one of the biggest trading scandals in decades.
• Royal Dutch Shell Plc has promoted Stacie Pitts, Carolyn Comer and Alice Acuna to lead three of the five biggest trading businesses in the company.