DTN Oil

CRANBURY, N.J. (DTN) -- West Texas Intermediate futures on New York Mercantile Exchange and Brent crude on the Intercontinental Exchange nearest delivery are trading near their June lows with the diesel and gasoline contracts bobbing on either side of unchanged early Monday, as new COVID-19 cases in China raise concern over a second wave of infections in the United States, where several states have seen an increase following state reopenings after ending restrictions to curb the spread of the coronavirus.

China Daily said Beijing reported 43 active confirmed cases on Sunday, with Reuters indicating 79 cases in China's capital over the past four days following no cases in the previous two months, triggering the government to create security checkpoints, close schools and order residents to be tested. China Daily said Sunday 830 people in Tianjin which borders Beijing, that "had any connection with six markets in Beijing have been under quarantine at designated sites since Saturday." All 830 people tested negative.

The Nikkei was down more than 750 points or 3.5% overnight, the Hang Seng Index fell 525 points or 2.2%, and the Shanghai Composite Index was down 30 points or 1%.

Worry that a second wave of COVID-19 infections in the United States would again prompt government shutdowns in the United States sparked selling in overbought markets late last week, with new cases climbing sharply in several states. On June 12, there were 25,382 new cases in the United States, with the platform indicating 20% of the U.S. population is staying at home.

The developments come ahead of the latest round of phased in state economy reopenings in New York and New Jersey, two states hit hard early in the pandemic, with their governors more slowly allowing economic activity to resume. New Jersey Monday is allowing outdoor dining at restaurants for the first time since March, with the restaurant industry hit hard by the pandemic. Open Tables said as of Saturday, seated diners at restaurants globally were down about 65% against year ago, which is right about where the United States sits. The numbers vary greatly across the globe, with heavy restrictions keeping restaurants closed in the United Kingdom and Ireland, while seated diners in restaurants in Germany are down only 14%. Just under 50% of restaurants in the United States are taking reservations.

Apple mobility trends data shows driving activity in the United States up 43% from a Jan. 13 baseline as of Saturday, down slightly from Friday, suggesting high unemployment and work from home initiatives are dampening demand for gasoline. Gasoline supplied to the U.S. market averaged 7.9 million barrels per day (bpd) during the week ended June 5, according to the Energy Information Administration, down 1.977 million bpd or 20% against year ago.

The Transportation Security Administration reported 502,209 passengers passing through TSA checkpoints at U.S. airports on June 11, the most since March 20, a week after U.S. President Donald Trump declared COVID-19 pandemic a national emergency, while down 2.17 million or 81.2% against year ago. During the four weeks ended June 5, EIA data shows jet fuel supplied to the U.S. market down 1.14 million bpd or 63.8% at 648,000 bpd.

The pace of the demand recovery for fuels is hinged not just on state government reopenings, but also on how people adapt to the new reality of living with a pandemic. An Ernst and Young found 69% of consumers they surveyed on their expected buying practices and activities going forward said they would not go to a gym, the movies or bars for months or even years.

On Sunday, Reuters reported Iraq and major oil companies operating in the country's southern oil fields agreed to additional reductions in crude production of 330,000 bpd in June. Iraq, which reported crude production of 4.48 million bpd in April, agreed on April 12 to cut their output to 3.592 million bpd in May and June as part of the OPEC+ agreement, but fell well short of compliance. Earlier in June, OPEC+ agreed to extend their collective output cuts of 9.7 million bpd through July before tapering off to 7.7 million bpd for the rest of the year provided all countries adhere to their quotas. Saudi Arabia and Russia were insistent the Iraq and OPEC member Nigeria, also falling well below compliance, make up for the missed cuts in July, August and September.

OPEC+ will conduct its first compliance monitoring meeting on Thursday.

In early trading, NYMEX July WTI was down $0.65 near $35.85 per barrel (bbl), with ICE August Brent $0.40 lower near $38.30 bbl. July ULSD futures were flat near $1.1005 gallon, and July RBOB futures softening about 0.045 cent to $1.12 gallon.

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

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