The crude oil market is positively giddy as vaccine hopes rise and China briefing refinery run records and Japan's economy is on fire, says Phil Flynn of the PRICE Futures Group.

Reports of last week that Pfizer-BioNTech’s successful Covid-19 drug trial and today's report that Moderna Inc. said its experimental coronavirus vaccine was 94.5% effective at protecting people from Covid-19 is raising hopes that life and oil demand might return to normal. Seasonal lows that we said were in after getting help from recent developments continue to develop.

Yet it is the commodities that are really getting a boost from that news, as well as data in China that will keep us moving. The Wall Street Journal reported that, "Commodities rallied after strong economic data out of China and Japan pointed to healthy demand for industrial metals. Chinese industrial production rose 6.9% in October from a year earlier. Gross domestic data showed Japan’s economy grew by its fastest pace in 40 years in the third quarter. Copper jumped as much as 2% to its highest level since June 2018. Brent crude, the international benchmark for oil, rose 2% to $43.65 a barrel.

Asian stocks benefited from the signing of a major trade deal that includes China, Japan, South Korea, and 12 other countries. The regional bloc covers around a third of global economic output.

While lockdowns still threaten oil demand in the short term, the data out of Japan and China suggest that demand for oil is not as bad as many have been saying it would be. Doom and gloom are being replaced with optimism. While lockdowns may hamper demand in the short term, in the longer term the supply situation will be much tighter.

The short-term demand slump may be offset by strong Asian demand and OPEC adjustments. Recently, OPEC+ not only signaled that they would extend the current rate of cuts of 7.7 million barrel a day but would likely shock the market with a deeper cut to get the market over the lockdown hump. Now with vaccines on the way that will be in a much shorter period of time.

The market action in natural gas reminds me that I should not trust long-term weather forecast. Sources that I use for weather were predicting that we would be entering a period of arctic cold. Instead, forecasts are not only not showing that but are actually showing a warmer trend. The fundamentals on natural gas look supportive but if we get another warm winter, natural gas may just stay about where it is.

Learn more about Phil Flynn by visiting Price Futures Group.