WTI, Brent Futures Head for 2% Weekly Drop on Demand Concerns

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- In early trade Friday, nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange moved lower and are on track for weekly declines as traders look to rising coronavirus cases in several major global economies, dampening expectations for a recovery in demand through the end of the year, while hopes for additional stimulus in the United States continue to fade ahead of presidential elections in November.

In early trade, NYMEX West Texas Intermediate futures for November delivery again fell below $40 per barrel (bbl) early Friday, trading near $39.75 bbl, and the international crude benchmark November Brent contract slipped 35 cents to near $41.60 bbl. NYMEX October ULSD futures faded 0.5 cents to near $1.1115 gallon, and front-month RBOB futures dropped 0.80 cents to $1.18777 gallon.

U.S. durable goods orders for August set for release Friday morning by the U.S. Census Bureau are expected to show a slowdown to a 1.5% increase from July's 11.7% spike and a 7.5% advance in June. New orders for durable goods, excluding defense capital goods, is a subset of retail sales, which dropped below expectations last month with a 0.4% increase. Softening sales orders join slowing industrial production, which increased by a mere 0.4% during August with manufacturing output rising only 1%, further evidence U.S. economic growth is shifting lower.

Further weighing on sentiment, U.S. labor market is flashing fresh signs of a stalled recovery, with first-time unemployment claims unexpectedly increasing to 870,000 during the week ended Sept. 19 and continued claims -- the number of people collecting unemployment benefits for consecutive weeks -- fell a less than expected 167,000 from the previous week's adjusted 12.580 million level. For an economy running at a roughly 32% annualized growth rate in the third quarter according to the Atlanta Fed GDPNow estimate, nearly one million new layoffs each week suggest the pop in economic growth following the end of most government lockdowns in June is unsustainable.

Thursday, investment bank Goldman Sachs downgraded its outlook for the fourth quarter economic growth to 3% from 6% after changing its base case to include no new stimulus from congress this year. There are signs U.S. lawmakers are making a fresh attempt to restart relief talks to aid the battered economy, with media reports indicating House Democrats are receptive to a "scaled down" $2.4 trillion coronavirus aid proposal but still remain more than $1 trillion apart from what Republicans would prefer to spend before the Nov. 3rd presidential elections.

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

Liubov Georges