Oil Futures Selloff Extends to 3rd Day

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange extended a coronavirus selloff to a third day Wednesday. Declines accelerated in market-on-close trade after a wave of renewed risk aversion over global COVID-19 epidemic swept across commodity and equity markets.

The oil complex managed to only briefly halt the recent declines after weekly government data showed a much-smaller-than-expected build in domestic crude stocks and hefty drawdown in refined products during the week ended Feb. 21. Energy Information Administration reported nationwide crude oil supply increased for the fifth consecutive week, up 451,968 barrels (bbl) to 443.3 million bbl, a fresh 10-week high. Even so, the modest build was bullish against earlier calls for a 3.9 million bbl increase in crude stocks, briefly lifting front-month West Texas Intermediate contact above $50 bbl mark. NYMEX April WTI futures ended the session down $1.17 at $48.73 bbl and ICE April Brent declined $1.52 for a $53.43 bbl settlement. April Brent expanded its premium to $0.62 against the May contract ahead of expiration Friday afternoon.

NYMEX RBOB futures fell the most among petroleum complex, with front-month March contract tumbling 7.75 cents to a three-week spot low $1.4549 settlement. Wednesday's declines came even as EIA data showed gasoline inventories fell for the fifth straight week, down 2.7 million bbl during the reviewed period and demand for motor gasoline extended higher.

NYMEX March ULSD futures dropped 6.91 cents to a 31-month spot low $1.4994 gallon, shrugging off a sixth consecutive weekly drop of 2.1 million bbl in domestic distillate supply.

Fears over the coronavirus epidemic returned to the forefront in afternoon trade Wednesday amid reports of hundreds of new coronavirus cases across Europe, Asia and the Middle East. World Health Organization chief Tedros Adhanom Ghebreyesus said Wednesday that, while the sudden rise in novel coronavirus cases was "deeply concerning," the virus could still be contained and did not amount to a pandemic.

U.S. President Donald Trump and federal health officials planned to brief the public at 6 p.m. EST on efforts to prevent the spread of coronavirus. Earlier this week, U.S. Centers for Disease Controls warned of inevitable COVID-19 pandemic with unavoidable outbreaks domestically. CDC expects the virus to circulate through local communities in the coming weeks and called for businesses and schools to plan for potential outbreaks.

Global financial markets continued their recent selloff Wednesday, with declines led by Asian equities. European markets also posted steep losses as investors were alarmed by the seemingly uncontrollable spread of the disease across the European Union. U.S. stock indexes briefly recovered early losses only to end the session in the negative for the third straight session.

The International Energy Agency said it is likely it will again downgrade its global crude oil demand forecast in the coming weeks, as it sees more risks to economic growth as a result of the latest spike in new infections. Earlier this month, the Paris-based energy watchdog forecast global oil demand to post a rare 435,000 barrel-per-day quarterly drop during the first three months of the year, driven by contraction in China's fuel consumption.

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


Liubov Georges