Oil Tumbles Lower at the Close

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON(DTN) -- New York Mercantile Exchange nearest delivery oil futures and Brent crude on the Intercontinental Exchange continued lower on Thursday, with declines led by an accelerated sell-off by the RBOB contract as concerns over spreading coronavirus forced emergency travel restrictions and shutdowns in the United States, limiting mobility and demand for refined products.

On the session, NYMEX April West Texas Intermediate futures fell $1.48 to $31.36 per barrel (bbl) and ICE Brent contract plunged a steeper $2.57 at $33.22 bbl. NYMEX April ULSD futures settled down 7.82 cents at $1.1598 gallon and NYMEX April RBOB contract ended the session below $1 gallon, falling to a more than 11-year low settlement on the spot continuous chart at $0.8975 gallon.

RBOB futures are typically in a seasonal uptrend this time of year, but a string of closings across the country that are seen intensifying will sharply reduce gasoline demand, triggering a stunning reversal in the forward curve from backwardation to contango midweek.

Thursday's session brought more losses for the oil complex, even though West Texas Intermediate reclaimed some of those losses after Federal Reserve said the central bank would inject $1.5 trillion into the financial system to ensure ample liquidity.

Still, the rapid spread of COVID-19 has sparked a string of business and sports events cancellations in the United States, including a suspension of professional basketball and hockey seasons.

New York Stock Exchange was forced to temporally halt trading for the second time this week after stocks plunged over 7% at the market's open, pressured by investors' anxiety over looming recession.

Further feeding into bearish sentiment, U.S. President Donald Trump announced new travel restriction from the European Union as he unveiled new measures to fight the coronavirus spread domestically.

World Health Organization on Thursday called for all governments to double down on their efforts to contain the deadly virus a day after declaring COVID-19 a global pandemic. By Thursday, the novel coronavirus outbreak in the United States had grown to at least 1,323 cases, with clusters in New York, Washington State and California, according to Johns Hopkins University, which is tracking reports and confirming them with local health departments.

Oil prices fell over 30% this week amid a one-two punch of coronavirus slowing business activity and the start of volume war among the world's largest oil producers. Following the breakdown of OPEC+ talks last week, Saudi Arabia and United Arab Emirates announced drastic increases in production capacities up to 3.6 million bpd combined that will start in April.

UAE Energy Minister, Suhail Muhammed Faraj Al Mazroui said his country would raise production capacity to 4 million barrels per day (bpd) in April, with plans to further increase output to 5 million bpd. Earlier this week, Saudi Arabia threatened to raise output to 13 million bpd, with production in February averaging 9.683 million bpd. If realized, both Gulf producers plan to add a combined 3.6 million bbl, equivalent to 3.6% in global oil supplies to the market at a time when the coronavirus has wiped out demand growth.

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


Liubov Georges