DTN Oil

CRANBURY, N.J. (DTN) -- Nearest-delivered New York Mercantile Exchange oil futures and Brent crude futures on Intercontinental Exchange settled Friday's session shallowly mixed. Products captured modest gains after a choppy session, while all contracts moved sharply lower from the prior Friday following Thursday's selloff.

Thursday's drubbing, which aligned with a 6.9% selloff in the Dow Jones Industrial Average, was on concern over the possibility of new state shutdowns due to COVID-19 following spiking cases in parts of the country, which would again cause economic damage. Another lockdown would undo modest gains in gasoline and diesel demand over the second quarter and reverse the nascent -- if still distant -- recovery in jet fuel demand.

University of Maryland's COVID-19 Impact Analysis Platform shows new cases jumping sharply in June through June 9, the most recent data available, with California leading states with 26,829, causing an estimated 8.2% decline in consumption. Texas followed with 15,788 new cases during the first nine days of June, followed by Florida, 10,582; Illinois, 10,330; New York, 9,822; North Carolina, 9,433; and Arizona, 9,044.

More testing could be contributing to a higher headcount, and it is unclear how protests and riots might have affected the caseload. After nearly three months of lockdowns, many people just needed to get out, and the end of state restrictions and warm, summerlike weather might have prompted a sense of comfort, leading to people letting their guard down.

The resumption of economic activity across wide swaths of the U.S. economy led to a 2.835-million-barrel-per-day (bpd) or 56% jump in implied gasoline demand from a 5.065-million-bpd trough at the start of April to 7.9 million bpd during the first week of June. Driving demand is expected to continue to increase in the coming weeks, with another government shutdown the biggest risk to the recovery. Still, gasoline demand last week was down 1.977 million bpd or 20% against the comparable week a year ago and will continue to underperform year prior amid high unemployment, with the U.S. jobless rate at 13.3% in April.

The market initially cheered the Federal Reserve's expectations for the U.S. unemployment rate to average 9.3% this year and 6.5% in 2021, while consumer sentiment improved in early June on lower trending employment losses. U.S. consumer sentiment improved to a more-than-expected 78.9 in June from 72.3, according to the University of Michigan's Surveys of Consumers released Friday morning even as consumers noted the economic wreckage caused by the pandemic and government response to slow the spread of the virus.

"The turnaround is largely due to renewed gains in employment, with more consumers expecting declines in the jobless rate than at any other time in the long history of the Michigan surveys," said Richard Curtin, chief economist of the survey.

Labor Department last week reported nonfarm payroll employment increased 2.5 million in May, catching the market by complete surprise, adding fuel to gains in equities and oil futures. All futures contracts rallied to three-month highs this week before reversing lower, while the NASDAQ crossed 10,000 for the time in history Wednesday.

Equity markets again brushed aside the economic wreckage Friday, with the U.S. economy entering a recession in February, the National Bureau of Economic Research announced on Monday. The Fed expects a 6.5% economic contraction this year.

The Dow Jones Industrial Average rallied 477.37 points or 1.9% to 25,605.37, the S&P 500 Index gained 39.21 or 1.31% on the session to 3,041.31 and the NASDAQ was up 96.08 or 1% at 9,588.8082.

NYMEX July West Texas Intermediate futures ended near flat at $36.26, down $0.08 on the session and $3.29 or 8.3% on the week. ICE August Brent settled up $0.18 at $38.73 per barrel (bbl) while erasing $3.57 or 8.4% in value on the week. NYMEX July RBOB futures edged up $0.0055 to a $1.1243-per-gallon settlement, although lost $0.08093 or 7.4% on the week. NYMEX July ULSD futures gained $0.0134 to $1.1014 per gallon Friday and fell $0.0492 or 4.3% in value since the prior Friday.

Brian L. Milne can be reached at brian.milne@dtn.com

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