Crude Drift Lower in Friday Trade

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Heading into early morning Friday, crude and product futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange again drifted lower and equities were mixed as a record rise in U.S. coronavirus infections taper expectations for a robust economic recovery, with new quarantine restrictions and stubbornly high unemployment weighing on the market sentiment.

In early trading, NYMEX West Texas Intermediate August futures slipped 25 cents to $40.50 per barrel (bbl) and the international benchmark Brent crude for September delivery traded near $43 bbl. NYMEX ULSD August futures declined 0.41 cents to $1.2238 gallon and the front-month RBOB contract traded near two-week spot low $1.2292 a gallon.

The United States recorded a record 77,000 new coronavirus cases in the last 24 hours, with Florida and Texas reporting the largest one-day increases in virus-related deaths, according to the data collected by John Hopkins University. Globally, pockets of new virus outbreaks continued to pop-up this week from Japan to Argentina, triggering new quarantine travel restrictions and business reclosures. The European Union extended on Thursday its travel ban on Americans for another two weeks as the country struggles to bring its outbreak under control. That dynamic is coupled with a worrying trend in the U.S. labor market, with last week's tally in jobless claims was virtually unchanged from the previous week at 1.3 million new claims, sapping the bullish momentum out of markets. The Dow Jones Industrial snapped a four-day winning streak on Thursday and is positioning up for a weaker open this morning.

Separately, drilling rig data provider Enventus said Friday U.S. active oil and gas rigs rose by nine to a net 288 during the week ended July 15, signaling a widely awaited recovery in U.S. upstream sector. Baker Hughes is due to report its weekly data on U.S. drilling activity 1 p.m. ET.

Organization of the Petroleum Exporting Countries and 10 producers led by Russia decided to taper production cuts by 2 million barrels per day (bpd) to 7.7 million bpd beginning Aug. 1 through the end the year. However, compensation cuts from laggard members Nigeria, Iraq and Angola for August and September could offset some of the production coming back online.

OPEC officials see production increases justified as demand gradually returns from its pandemic's nadir in April. Russian Energy Minister Alexander Novak sees global oil demand in August to rebound to 10% below the pre-crisis levels but full recovery remains unlikely for at least another year.

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

Liubov Georges