Oil Futures Fall Further Friday

WASHINGTON (DTN) -- Falling from overnight highs, oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange eroded further on Friday.

The front-month West Texas Intermediate contract expired at its lowest since 1991 under pressure from the spread of the coronavirus. The pandemic is slashing global oil demand by shuttering businesses and halting international travel. Meanwhile, the bruising price war between Saudi Arabia and Russia is further weighing on market sentiment.

On Friday, NYMEX April West Texas Intermediate futures expired $2.79 lower at $22.43 per barrel, with the new front-month delivery May contract sharply narrowing its premium to $0.20 per bbl at settlement. WTI futures dropped over 29% this week and shed nearly 50% since the beginning of March.

On the session, ICE May Brent dropped $1.49 to a $26.98-per-bbl settlement, falling 18.6% on week and down 45% thus far this for the month.

NYMEX April ULSD futures declined 3.54 cents to finish at $1.0063 gallon, down 10% from a week ago, Friday, March 13. Front-month NYMEX RBOB contract settled down 7.96 cents at $0.6054 gallon, edging off an 18-year low $0.60310 after falling 30% this week.

Russian officials on Friday rebuffed the claim that the country was seeking mediation in its oil ties with Saudi Arabia, while emphasizing Moscow has a "good" relationship with Riyadh and sees no signs of a looming price war. The comments raised a few eyebrows in light of recent developments that saw Saudi Arabia slashing its benchmark export prices and hiking production above the previous maximum 12.3 million barrels per day (bpd). Crude prices slumped over 45% in March as traders anticipate a flood of cheap oil supplies at a time when the global demand took a massive hit from the spreading pandemic.

As epicenter of the disease moves out of China, Europe and the United States have become a new hot spot for the deadly outbreak, causing lockdowns of landmark cities, entire countries and borders. On Friday, New York State Governor Andrew Cuomo declared a complete shutdown of all nonessential travel across the state, citing an "uncontrollable" spread of infection. That follows similar measures in California, Washington State and starting Saturday, March 21, Illinois. The Trump administration announced Friday that the U.S. will be closing its borders with Mexico and Canada as the country battles the coronavirus.

Stocks on Wall Street took a heavy beating this week even as lawmakers on the Hill attempted in vain to boost investors' confidence through massive stimulus measures aimed at shielding the economy. Late Thursday, March 19, Senate Republicans unveiled a new $1 trillion Coronavirus Aid package following passage of a Phase 1 Stimulus Act which includes expansion of social security benefits and paid family sick leave.

Coronavirus-led slowdown already began to show up in U.S. unemployment data, bringing the number of those seeking government assistance during the week-ended March 14 to 281,000, well above the consensus for 220,000 filing.

The oil complex on Thursday found some support after the U.S. government announced the purchase of an initial 30 million bbl of domestically produced crude to fill the Strategic Petroleum Reserve. As part of a stimulus package, the U.S. Department of Energy pledged to purchase a total of 77 million bbl.

This solicitation is intended for crude oil to be delivered in May and June, although early April deliveries are encouraged, DOE said.

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

(CZ)

Copyright 2020 DTN/The Progressive Farmer. All rights reserved.