Oil Mixed in Morning Trade

WASHINGTON (DTN) -- Crude and product futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange were mixed early Tuesday after a bump higher in overnight activity, drawing some support from a modest recovery in U.S. equity markets after another historic selloff in the previous session, while fundamentals remain overwhelmingly bearish.

Overnight data from Germany point to a steep contraction of business sentiment in eurozone's largest economy, down to a negative 43.1 reading in February versus negative 25 expected.

The first timely survey of the German economy that account for coronavirus outbreak also point to further deterioration in economic activity during the first weeks of March, making it the largest slump in business sentiment ever recorded.

In the United States, U.S. Federal Reserve will release its monthly estimates on industrial production for February due out at 9:15 a.m. ET. Market consensus still call for a modest rebound of 0.4% from a negative 0.3% showing last month. However, the latest industrial data is not expected to incorporate the impact from the widespread shutdowns and layoffs over the past two weeks.

At the start of a tumultuous week, the Fed slashed its benchmark interest rate to near zero and took several other rare actions to negate the impact from the coronavirus pandemic that has now sickened over 4,700 people, a jump of nearly 50% from Friday (3/13).

U.S. equity futures edged higher in early trade Tuesday following the biggest Wall Street rout in more than three decades, as investors grew more anxious over an unpredictable coronavirus infection rate and the likelihood of U.S. recession.

U.S. President Donald Trump suggested Monday that it may be "August, it could be July, could be longer than that" in estimating how long it may take to beat the infection.

Goldman Sachs forecasts U.S. economic growth will shrink 5% in the second quarter after 0% gross domestic growth in the first three months of the year, as businesses slash spending and lay off employees.

"The uncertainty around all of these numbers is much greater than normal," said Goldman.

Consumers and businesses will continue to cut travel, entertainment, and restaurant spending, while supply chain disruptions and tightening in financial conditions will further dent growth, they said.

In the meantime, countries around the world are taking unprecedented steps to contain the virus, severely crippling demand for crude and refined products including gasoline and jet fuel.

Oil prices are down more than 55% since the start of the year from the intense pressure from both supply and demand sides. World top oil producers Saudi Arabia and Russia ramped up output this month and slashed prices in their battle for global market share.

Reuters reported Saudi Arabia has boosted its crude supplies to traditional buyers of Russia's main blend Ural at a steep discount of $25 per barrel (bbl) on CFI Rotterdam basis. Refitiv Eikon data showed Monday Russia's Ural Blend offered slightly higher than $30 bbl, suggesting it is being outpriced by the steep Saudi discounts. Saudi Aramco CFO Khalid al-Dabbagh said on Monday the company was very comfortable with $30 bbl oil prices and can sustain higher oil output planned for April well into June.

Near 7:45 a.m. ET, NYMEX April West Texas Intermediate futures climbed $0.42 off a four-year low to $29.13 bbl and ICE May Brent were up $0.13 at $30.17 bbl before reversing down. NYMEX April ULSD futures gained 0.92 cents to $1.0558 gallon and front-month RBOB April contract surged as much as 5.81 cents from an 18-year low $0.6899 settlement on Monday, having pared the gain. RBOB futures have come under extreme selling pressure as the spread of coronavirus halts mobility, with gasoline demand set to plunge.

Liubov Georges can be reached at liubov.georges@dtn.com

(CZ)

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