Oil Lower in Monday Trade

WASHINGTON (DTN) -- At the beginning of a new trade week, oil futures on New York Mercantile Exchange and Brent crude on Intercontinental Exchange turned lower, pressured by mounting fears over economic contraction and a second wave of infections in countries emerging from coronavirus lockdowns, while production curtailments by North American producers and Organization of the Petroleum Exporting Countries lent tepid support.

In early trading, West Texas Intermediate contract for June delivery slipped $0.55 to trade near $24.19 per barrel (bbl) after gaining about 24% in value last week. The international Brent crude contract with July delivery dropped $0.73 to trade near $30 bbl after a 16% advance last week. NYMEX June ULSD futures traded softened to $0.8920 gallon and NYMEX June RBOB contact reversed down from a $0.9773 fresh eight-week high on the spot continuous chart after gaining over 24% last week, trading just below $0.9500 gallon.

Oil and equities struggled to hold their recent gains early Monday, with investors watching for a possible new wave of coronavirus infections as countries around the world ease lockdown restrictions. South Korea and China reported over the weekend new clusters of COVID-19 cases in several provinces believed not related to overseas travel, prompting Beijing to lock down two northeastern cities. Wuhan, the original epicenter of the outbreak, reported new coronavirus cases in more than a month.

Countries in western Europe and in several states announced further easing of coronavirus restrictions even as some still register a steady increase in new infections. Britain became the latest country to announce gradual easing of social distancing guidelines over the weekend.

Analysts believe there will be a bumpy road ahead, arguing the rally in oil and equity markets could be easily derailed by a renewed rise in infections or signs economic rebound won't be so swift.

Last week, employment data in the United States showed 20.5 million jobs were lost in April, with the unemployment rate jumping to a record-breaking high 14.7%. In early March, that figure was just under 3.5%, a 50-year low, before stay at home directives were issued across most U.S. states.

On the supply side, independent producers in the United States and Canada believed to have cut deeper and faster than many had previously forecasted. Last week, the number of active oil and gas rigs the United States fell to an all-time low 367, with the oil rig count down for an eighth consecutive week to 292. In Canada, operators have shut-in 644,000 barrels per day (bpd) or 13% of supply since February, according to Eight Capital analysts.

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