DTN Oil

WASHINGTON (DTN) -- After back-and-forth trade for most of the Friday session, New York Mercantile Exchange West Texas Intermediate crude futures and Brent crude on the Intercontinental Exchange settled slightly lower and refined product drifted down about a penny as traders grew increasingly pessimistic about the outlook for transportation and demand growth this year as a massive wave of coronavirus infections in the United States dents expectations for a robust recovery.

The Index of Consumer Sentiment dropped to near April's lows at 73.2 this month, according to University of Michigan data published this morning, reversing nearly all gains made the month prior. "Further declines are more likely in the months ahead as the coronavirus spreads causes continued economic harm, social disruptions, and permanent scarring," said Surveys of Consumers Chief Economist Richard Curtin.

There are growing signs the domestic economy is losing its post-lockdown steam, with weekly unemployment numbers remaining stubbornly high and new quarantine measures being re-introduced in several states.

This week, California Governor Gavin Newsom announced the re-closure of all indoor business activity, which now includes dining, gyms, bars, etc. California is the second largest state for gasoline consumption behind only Texas, which has also seen its share of business re-closures as it battles virus outbreak. After days of intense speculation, Texas Governor Abbott said Friday the Lone Star state will not consider shutting down again. Both states recorded their largest single-day increases in virus related deaths on Thursday, according to data collected by John Hopkins University.

Meanwhile, more than 50 million Americans have now filed for unemployment benefits since the pandemic first started four months ago, fueling concerns about an extended period of below-trend output and employment.

Against this backdrop, Organization of the Petroleum Exporting Countries and Russia-led partners decided to taper their cuts by 2 million beginning Aug. 1 to 7.7 million barrels per day (bpd) until the end of the year. The actual cuts in Aug.-Sept. could be steeper, however, as members that failed to reach their pledged targets in the last two months, namely Nigeria and Iraq, are supposed to compensate for the laggard performance. OPEC officials see production increases justified as demand gradually returns from its pandemic nadir but some analysts believe the move could be risky. Russian Energy Minister Alexander Novak sees global oil demand in August to rebound to 10% below the pre-crisis level but full recovery remains unlikely for at least another year.

Separately, Baker Hughes reported Friday the U.S. oil rig count declined for an 18th consecutive week, down 1 to 180, the lowest level since the first week of June 2009.

The U.S. oil rig count is down 599 from year ago, with over 475 of those rigs pulled from service in the second quarter.

On a session, NYMEX West Texas Intermediate August futures eased 16 cents to settle at $40.59 and the international benchmark Brent crude for September delivery finished the week just above $43 per barrel (bbl). NYMEX ULSD August futures declined 0.88 cents to $1.2191 gallon and the front-month RBOB contract settled Friday at $1.2245 gallon, near a two-week low.

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

(c) Copyright 2020 DTN, LLC. All rights reserved.