Crude Futures Plunge in MOC Trade

WASHINGTON (DTN) -- Except for the nearest delivery RBOB contract, oil and product futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled lower Tuesday with losses accelerated during market-on-close trade, once again pressured by concerns over the coronavirus pandemic that is severely disrupting the global economy and undermining demand for crude oil, while Saudi Arabia and Russia doubled down in their battle for market share.

Tuesday afternoon, oil traders positioned ahead of weekly inventory data from the American Petroleum Institute due out at 4:30 p.m. EDT. Markets mostly expect nationwide crude oil stocks to have increased by about 3.9 million barrels (bbl) during the week ended March 13, with refinery runs likely to have increased around 0.3%. Gasoline stocks are expected to have decreased by 3.5 million bbl and distillate inventories are projected to have decreased by 2.2 million bbl on the week.

NYMEX April West Texas Intermediate futures closed down $1.75 at a fresh four-year spot low $26.95 bbl and ICE May Brent dropped $1.32 for a $28.73 bbl settlement. NYMEX April ULSD futures shed 1.09 cents to $1.0357 gallon and front-month RBOB April contract clawed back 2.15 cents from an 18-year spot low $0.6899 settlement session prior.

After back-and-forth trade for most of the session, crude futures dropped again on Tuesday amid a whole set of bearish factors currently weighing on the market. The Saudi Energy Minister Prince Abdulaziz bin Salman said Tuesday that the kingdom's crude exports are set to increase to more than 10 million barrels per day (bpd) in coming months, as it plans to use more gas for domestic power generation rather than burning crude. Earlier reports indicated Saudi Arabia has flooded traditional buyers of Russian crude with ultra-cheap Arab Light barrels at a discounted rate as low as $25 bbl.

Goldman Sachs on Tuesday lowered its second quarter outlook for Brent crude to $20 bbl from $30 in the previous forecast just two weeks ago.

"COVID-19 is driving second-order effects in both commodity and equity markets that are creating outcomes which far exceeded our negative views from last month," wrote Goldman Sachs analyst Jeffrey Currie in a note Tuesday.

The investment bank has also cut its forecast for U.S. economic growth by 5% in the second quarter after downgrading economic expansion to 0% in the first three months of the year.

Overseas, Germany reported the steepest monthly contraction of business sentiment ever recorded in the Eurozone's largest economy, down to a negative 43.1 reading last month. The first timely survey of the German economy that accounts for coronavirus also point to further deterioration in economic activity during the first weeks of March.

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

(CZ)

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