DTN Oil

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange extended lower for a third straight session Wednesday as investors adjusted their expectations for global demand recovery in the fourth quarter amid a record surge of coronavirus cases and accelerated quarantine restrictions across major economies.

On the session, December West Texas Intermediate futures declined more than $2 per barrel (bbl) to settle at a 3-week low $37.39 bbl and ICE December Brent dropped to the lowest settlement in nearly five months at $39.12 bbl. The second-month delivery January Brent contract expanded its premium slightly to 52 cents ahead of December contract's expiration Friday afternoon. NYMEX ULSD November futures plunged 4.35 cents or 3.7% to $1.1142 gallon, with December futures slipping to a fractional discount to the expiring contract. NYMEX RBOB November futures plummeted 6.2 cents or more than 5% to $1.0814 gallon, with the second-month delivery December contract widening its discount to 1.78 cents.

The oil complex took another day of heavy selling on Wednesday as investors continued to flee risky assets amid growing uncertainty over a second wave of coronavirus infections that are leading to lockdowns in Europe joined by the divisive U.S. presidential election.

Markets took a deep dive after reports emerged Germany and France, the Eurozone's largest economies, will likely go into a month-long lockdown in coming days as governments struggle to contain the spread of coronavirus. Germany's government confirmed Wednesday afternoon it will close all bars and restaurants for four weeks, while details of a proposed lockdown in France have yet to be unveiled. The impact of new restrictions will undeniably cut deep into the nascent economic recovery for the 19-nation bloc, with the French economy now projected to contract in the fourth quarter.

Domestically, major investment banks revised lower U.S. gross domestic product forecasts for the current quarter to below 5%, citing the inability of Washington lawmakers to reach a stimulus deal, while rising coronavirus cases across parts of the country threaten business activity. The step down in growth follows a robust third quarter for the U.S. economy that is estimated to have grown at a record pace, with the Atlanta Fed GDPNow projecting 37% annualized growth. U.S. Bureau of Economic Analysis will release its first estimate for third quarter GDP 8:30 a.m. EDT Thursday.

The oil futures selloff Wednesday accelerated after the Energy Information Administration reported commercial crude oil supplies jumped 4.3 million bbl during the week ended Oct. 28, well above market expectations for a 900,000 bbl increase. The build came despite greater export demand and increased refinery inputs, with domestic production surging a whopping 1.2 million barrels per day (bpd) to a 3-month high 11.1 million bpd.

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

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