Crude Futures Slide

WASHINGTON (DTN) -- Nearest delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange ended afternoon trade mixed Friday as governments around the world undertake unprecedented measures to arrest the slowdown of the global economy that is being bruised by the growing number of lockdowns and travel restrictions now extending to over three billion people worldwide.

NYMEX May West Texas Intermediate futures ended down $1.09 at $21.51 barrel (bbl), extending its fall to 4.1% this week. ICE May Brent settled $1.41 lower to $24.93 bbl, with the international crude benchmark sliding 7.6% this week, leading declines among the oil complex. The NYMEX RBOB April contract advanced 2.99 cents to a $0.5737 settlement, advancing off Monday's $0.3760 21-year low on the spot continuation chart. On the week, front-month RBOB futures dropped another 4.2%. The NYMEX ULSD April contract clawed back 1.82 cents for a $1.0685 gallon settlement on Friday, while gaining 6% on the week, the first weekly advance since mid-February.

Market focus this week remained on plunging global oil demand and growing number of lockdowns that now cover nearly one-fifth of the global economy. The latest countries to implement strict travel restrictions this week were India, the most populous country in the world, and the United Kingdom, where shockingly both Prime Minister Boris Johnson and heir to the throne Prince Charles tested positive for the COVID-19 virus.

Amid growing signs of economic distress, the International Energy Agency said global oil demand could fall by as much as 20 million barrels per day (bpd) or 20% this year, with declines accelerating in the second quarter.

Analysts believe global oil storage is filling up quickly under current conditions that could result in the global supply chain being completely full within two to four months. In the United States, fuel demand sank 2.1 million bpd in the most recent week, a near 10% drop as one in three Americans now live under a "shelter in place" order. Gasoline demand in the world's biggest oil consumer plunged nearly 900,000 bpd last week, with consumption set to deteriorate further in the coming weeks.

On the data front, U.S. consumer sentiment dropped by the steepest percentage point in over half a century this month, down 11.9% from a 24-month high 101.0 reading pre-pandemic. Also, the U.S. Labor Department reported the largest weekly surge in initial jobless claims in U.S. history, spiking three million people in a single week.

Federal Reserve Chairman Jerome Powell warned this week the United States might very well be in a recession already. However, he stressed it was unlike any typical downturn because the economy was so strong before the coronavirus pandemic sent the markets into a tailspin and unemployment soaring.

The G-20 summit concluded this week with no resolution on the Saudi-Russian oil price war, despite a global diplomatic push by the United States to bring the two producers back to the negotiating table. However, post-meeting there were some interesting comments from top Russian officials that the country could be considering a larger OPEC+ agreement that might potentially include producers from North America.

"We are in contact with Saudi Arabia and a number of other countries. Based on these contacts we see that if the number of OPEC+ members will increase and other countries will join there is a possibility of a joint agreement to balance oil markets," said Head of Russia Investment Fund Kiril Dmitriev.

Market expectations have been building for some sort of multilateral agreement among the producers not to inflict unnecessary damage on the global economy that is reeling from the spreading pandemic.

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

(CZ)

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