WASHINGTON (DTN) -- After notching hefty gains the week prior, oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange moved shallowly mixed in early trade Monday. Investors paused an advance on new data showing large spikes of coronavirus infections nationwide and globally, fueling concern a second wave of infections could potentially stall the near-term demand recovery.
The World Health Organization said Monday the global rate of COVID-19 infections rose by a record 183,020 per day over the past weekend, with the number of new cases seeming to have increased in some major demand centers. South Korea confirmed this weekend the country is now in the midst of the "second wave" and China re-imposed quarantine in the capitol of Beijing last week, stoking fears the deadly virus is reemerging once again.
Domestically, several recently reopened states, including California, Texas, and Florida, registered their highest daily count of coronavirus cases since early May. White House trade adviser Peter Navarro said over weekend the Trump administration is now preparing for the fall's resurgence of the deadly pathogen.
"We are filling the stockpile in anticipation of a possible problem in the fall," said Navarro.
If realized, the so-called "second wave" could potentially prompt officials to backtrack on plans to reopen the economy already under pressure from three months of demand-sapping coronavirus quarantine. Presently, over 20 million Americans continue to receive unemployment insurance benefits and some 20% of small businesses across the United States remain shut, according to the U.S. Chamber of Commerce. The White House calculates the economy has received over $400 billion in federal support in the recent months, with talks of more stimulus on its way from the White House this summer. The Paycheck Protection Plan was estimated to have saved as many as 55 million jobs according to Kudlow. These actions have limited the despair for millions, prompting guarded optimistic sentiment by consumers.
West Texas Intermediate and Brent contracts notched nearly 10% gains last week, with the international benchmark flipping into backwardation, signaling tightening global oil market. Organization of the Petroleum Exporting Countries and allied partners led by Russia pledged to adhere to better compliance with agreed to quotas under their 9.7 million barrels per day (bpd) supply-cutting deal, with compliance at 87% in May. Iraq and Kazakhstan presented a plan to the committee last week on how they would catch up on their obligations in July, August and September, with the committee giving Nigeria and Angola until Monday to present their plans.
The International Energy Agency expects global oil supply to fall by a steep 7.2 million bpd in 2020 amid production cuts agreed to by OPEC+ after world oil supply dropped 11.8 million bpd in May, with production cuts by OPEC+ joined by large reductions in oil output in Canada and the United States.
Domestically, U.S. crude production dropped by 600,000 bpd to 10.5 million bpd for the week ended June 12, partly as a result of widespread shut-ins due to Tropical Storm Cristobal. U.S. drilling rigs continued a downtrend trajectory, with Baker Hughes reporting Friday a 14th weekly decline in active rig counts to a 189 11-year low. U.S. oil rig count is now down 600 against a year ago.
NYMEX July WTI futures moved marginally lower to $39.50 barrel (bbl) ahead of the contract's expiration Monday afternoon, with the next-month delivery August contract near parity. July WTI futures rallied $3.49 or 9.6% last week. ICE August Brent crude traded near $42 bbl after flipping into backwardation late last week. NYMEX July RBOB futures were down 1.78 cents to $1.2538 gallon, moving off 15-week spot high at $1.2888, with the three-month spread in a tight 20-point range. NYMEX July ULSD futures traded little changed at $1.2114 gallon after advancing 10% last week.
Liubov Georges can be reached at firstname.lastname@example.org
(c) Copyright 2020 DTN, LLC. All rights reserved.