Oil's rally, fueled by vaccine progress, is running out of steam | Reuters

Oil's rally, fueled by vaccine progress, is running out of steam | Reuters

The oil market has rallied almost 40% in the last two months, pushing benchmarks to nine-month highs, in a euphoric response to progress on COVID-19 vaccines that has investors thinking the end of the coronavirus pandemic is in sight.

Reality struck back on Monday, however, with a selloff driven by the surge in cases in the United Kingdom. Infection rates are at their worst levels in numerous countries and vaccine distribution is proving to be slow, which means the cycles of lockdowns and travel restrictions will continue - keeping fuel demand tepid for many months.

That means the bulk of the rally is already in the rearview mirror, traders and brokers said. Brent crude hit a nine-month high of $52.48 a barrel last week, but gave back as much as 4% on Monday, while U.S. crude prices exceeded $49 a barrel before slipping.

“Even when traders see stability, there is always something unexpected that can happen, and then inflated prices reveal their glass legs,” Rystad Energy’s oil markets analyst Louise Dickson said.