Crude Oil Futures Gain Thursday

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and the front-month Brent contract on the Intercontinental Exchange registered gains Thursday. The oil products contracts settled at fresh multi-week highs, as RBOB futures surged as the pace of new unemployment filings slows and the White House talks about more stimulus.

The gasoline crack spread continued to improve, with the return on a barrel of oil the best since early March. The RBOB forward curve moved into backwardation through January delivery two days before the start of summer on Saturday, June 20, even as continued unemployment claims reached 20.544 million as of June 6, according to the Labor Department's latest update. The data showed initial filings for unemployment insurance eased 62,000 to 1.508 million during the week ended June 13, the tenth consecutive week in which first-time filings have fallen. And while the number of unemployed has skyrocketed with the forced government shutdown amid the COVID-19 pandemic, generous government payments have provided a strong safety net and limited the fallout for the U.S. economy so far.

That theme was further fueled by comments Thursday afternoon from U.S. President Donald Trump, Vice President Mike Pence, U.S. Secretary Steve Mnuchin and White House Economic Advisor Larry Kudlow that the Paycheck Protection Program might have saved as many as 55 million jobs and talk of further support for small businesses. A V-shaped recovery was again touted by Trump, while Kudlow sees the U.S. economy recovering losses by the first quarter 2021.

The U.S. economy entered recession in February, and the Federal Reserve on June 10 projected a 6.5% contraction for the economy in 2020 and growth of 5% in 2021.

The bullish talk fueled positive sentiment for oil futures following supply drawdowns for gasoline and distillate fuels reported Wednesday by the Energy Information Administration for the week ended June 12.

NYMEX July RBOB futures settled $0.0424 higher at $1.2577 gallon, a 15-week high on the spot continuous chart, with the gasoline contract having erased all the losses incurred during the countrywide lockdown aimed at flattening the COVID-19 curve and pulled two points above the August contract.

NYMEX July ULSD futures settled up $0.0166 at a fresh 14-week high on the spot continuous chart, continuing in an uptrend on the prospect of a recovery in freight movements and manufacturing activity, which slumped sharply in the current quarter.

The crude contracts consolidated higher, holding below recent highs, as the Joint Ministerial Monitoring Committee met for the first time Thursday since agreeing to extend 9.7 million barrels per day (bpd) in production cuts through July 31, which then are reduced to 7.7 million bpd through the end of 2020. OPEC reported an 87% compliance rate in May, with the JMMC co-chaired by Saudi Arabia's Energy Minister Prince Abdul Aziz bin Salman and Russian Energy Minister Alexander Novak recounting the goal of 100% compliance.

Countries producing above their compliance, Iraq, Nigeria, Angola, and Kazakhstan, need to make up for their shortfalls in July, August and September. Reports indicate the meeting was tense because Nigeria and Angola failed to provide a plan for how they would meet their shortfall, while Iraq and Kazakhstan previously submitted their compensation schedules. The committee gave Nigeria and Angola, which produced 180,000 and 100,000 bpd above their quotas in May, respectively, until Monday, June 22, to submit their detailed plans to move into compliance.

NYMEX July West Texas Intermediate futures gained $0.88 to a $38.84-per-barrel (bbl) settlement, with the August contract ending at a $0.21 premium. ICE August Brent futures moved up $0.80 in value with a $41.51-per-bbl settlement, with the prompt Brent spread moving into backwardation.

Brian L. Milne can be reached at brian.milne@dtn.com

Brian Milne