Oil Futures Mixed on Demand Concerns

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Bolstered by the drop to a fresh 2-year low by the U.S. dollar in overnight trade, front-month West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange pared earlier losses to move mixed in midmorning trade Friday, with front-month RBOB futures sagging under pressure from weak economic data out of the United States and European Union.

The University of Michigan's latest Surveys of Consumers showed the outlook on the economy and personal finances eroded further in late July due to continued resurgence of the coronavirus.

"The Expectations Index fell back to 65.9 in late July, tied with the 6-year low recorded in May, providing no indication that consumers expect the recession to end anytime soon," said Surveys of Consumers Chief Economist Richard Curtin.

The new data comes after the preliminary reading on U.S. gross domestic product plunged to a negative 32.9% in the second quarter, the steepest on record, underscoring the deep economic damage caused by the pandemic. Furthermore, the current trend in the U.S. labor market points to further erosion in sentiment as the number of weekly unemployment claims increased for a second week in a row. Unemployment benefits of additional $600 a week for nearly 30 million of Americans who lost their job due to the pandemic are set to expire Friday, with the U.S. Congress locked in bipartisan bickering over a new stimulus package.

Weighed down by economic uncertainty, the U.S. dollar sagged to a fresh 2-year low 93.130 on Friday, taking its July decline to around 5%, the most in 10 years, which has been so far supportive for the oil complex.

Near 11:00 a.m. EDT, NYMEX WTI September futures gained 20 cents to trade near $40 barrel (bbl) and the front-month international benchmark Brent crude contract traded near $43 bbl ahead of its expiration later this afternoon. Next-month delivery October Brent fell just below $43 bbl. The crude oil futures market structure flipped back into contango this week, indicating supply surplus last observed at the height of the pandemic in April and May. The NYMEX RBOB August contract slumped 3.25 cents or 2.6% to $1.1879 gallon, while next-month delivery September was at a better than 2-cent discount to August futures. Front-month ULSD futures traded little changed at $1.2119 gallon and contract for September delivery edged higher.

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

Liubov Georges