Oil Futures Close Mixed Monday

WASHINGTON (DTN) -- Following back-and-forth, uneven trade for most of the session, oil and product futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled mixed on Monday. The front-month RBOB contract fell to its lowest level in more than two decades as a spreading coronavirus pandemic rapidly sapped demand for motor gasoline across the United States and globally.

Governments around the world are increasingly implementing drastic measures to limit social mobility and curb international travel, leading to widespread lockdowns of cities, entire regions and national borders. As of Monday afternoon, nearly one in three Americans were asked to follow "shelter at place" orders until further notice. Cities such as San Francisco, Chicago and New York saw some of the most stringent regulations slapped on intracity travel in recent history. According to tracking data, vehicle movement in affected cities registered some of the most extreme declines in recent days as measures went into effect.

Globally, oil demand continues to fall precipitously along with a decline in world economic growth as a result of the coronavirus pandemic shuttering commerce and supply chains. Some forecasts now call for worldwide oil consumption to drop by as much as 10 million barrels per day (bpd) or 10% in the second quarter, making the largest decline ever recorded.

Faced with a grim outlook, oil producers in Texas reportedly approached Texas Railroad Commission -- a state regulatory body that prorated oil production in the states 40 years ago -- to consider a potential curtailment on statewide oil production. In the aftermath of the request, Texas Railroad Commissioner Ryan Sitton opened dialogue with Organization of the Petroleum Exporting Countries on a potential production agreement.

"We all agree we need an international supply deal as global economy recovers from COVID-19 pandemic," tweeted Sitton over the weekend.

In financial markets, stocks on Wall Street again dropped sharply Monday, reversing earlier gains after lawmakers on Capitol Hill failed for a second day to pass a $2 trillion relief package for the U.S. economy, with another vote not expected until at least Tuesday.

The recent selling was also accompanied by one of the most aggressive actions taken by the Federal Reserve "to confront disruptions" in the U.S. economy. The Central Bank announced Monday it would extend loans and purchase hundreds of billions of dollars in government debts to sustain credit markets. The Fed also said there was no limit on its purchases of Treasury and mortgage-backed securities, with the Federal Open Market Committee earlier this month announcing plans to buy $700 billion of these assets.

"While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate," said the Fed this morning.

The U.S. dollar reversed down from a 103.96 17-1/2-year high on the Fed announcement, weakening 0.17% in index trading Monday afternoon, while boosting front-month West Texas Intermediate futures.

On the session, NYMEX May WTI futures gained $0.73 to $23.36 per barrel (bbl) and ICE May Brent settled little change at $27.03 bbl after falling 18.6% last week. NYMEX April ULSD futures clawed back 0.98 cents to settle near $1.0161 per gallon. Front-month NYMEX RBOB contract plunged 19.36 cents to a better-than-20-year low of $0.4118 gallon.

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

(CZ)

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