DTN Oil

WASHINGTON (DTN) -- Nearest delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Friday's session with modest losses. All contracts moved off intrasession lows after industry data reported another large weekly decline in the U.S. oil rig count and U.S. President Donald Trump renewed his push to reopen the economy.

Earlier this week, the White House asserted the country would not go into another lockdown even if the pandemic intensifies again in the fall-winter flu season. Moderna and Oxford, two front-contenders for a coronavirus vaccine, announced Friday large-scale "Phase 2" testing to begin in July, both enrolling up to 100,000 volunteers to accelerate vaccine development.

Further bolstering investors, on Friday Centers for Disease Control and Prevention Director Dr. Anthony Fauci called Moderna's "Phase 1" trial "quite promising," while expressing optimism that a vaccine may indeed be achievable by year's end.

Oil and equities have staged an impressive rally in recent weeks on hopes for vaccine development and imminent reopening of the U.S. economy, with all 50 states having now partially lifted stay at home orders. Demand for motor gasoline has surged 34% or 1.725 million barrels per day (bpd) through May 15 from its pandemic low 5.065 million bpd in early April and real-time traffic data shows vehicle congestion returned to early March pre-lockdown levels in many cities. The recovery trend, however, is uneven. States, like New York and California continue to report depressed levels of traffic whereas in Georgia and Texas motorists are back to the roads with a vengeance.

Larger than expected production cuts by North American producers and members of the Organization of the Petroleum Exporting Countries also bolstered the oil complex, lifting U.S. and international crude benchmarks to a better than two-month high this week. Baker Hughes reported Friday another weekly decline in the number of active U.S. oil rigs, down 21 rigs during the week ended May 22 to 237, the fewest rigs in operation in the United States since July 2009. OPEC Secretary General Mohammed Barkindo warned, however, global producers must remain committed to their production cuts despite signs that demand is recovering from the plunge triggered by the coronavirus pandemic.

China, the epicenter of the COVID-19 outbreak, announced that after 30 years, Beijing has abandoned its policy of setting economic growth targets. China's gross domestic growth contracted 6.8% in the first quarter as a result of trade tensions with the United States and fallout from the pandemic.

Beijing shocked markets with an unprecedented move on Thursday to impose its national security law on Hong Kong that will likely trigger unrest across the former British colony. U.S. Secretary of State Mike Pompeo said on Friday the United States stands with the people of Hong Kong and urged China to reconsider the disastrous proposal.

"Any decision impinging on Hong Kong autonomy would inevitably impact our assessment of one country, two systems and the status of territory," said Pompeo.

At settlement, West Texas Intermediate July futures slipped $0.67 to settle at $33.25 barrel (bbl) after dropping as much as 9% earlier in the session. The international crude benchmark Brent July contract shed $0.93 at $35.13 bbl, having traded at a $36.98 ten-week spot high Thursday.

NYMEX June ULSD futures declined 0.7 cents to $0.9820 gallon at settlement, retreating from an early week five-week spot high at $1.0286 gallon. NYMEX June RBOB futures fell 0.69 cents to $1.0382 gallon, continuing a retreat from Wednesday's ten-week spot high $1.0888 gallon. Product futures came under selling pressure from a weekly buildup in gasoline and distillate fuel stocks, with the economy expected to contract sharply in the second quarter amid rising unemployment and a battered manufacturing sector implying weak demand for the fuels over the coming weeks.

Liubov Georges, 1.646.359.4088, liubov.georges@dtn.com, www.dtn.com

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