DTN Oil

WASHINGTON (DTN) -- Nearby-month delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled lower Wednesday, although all contracts moved off intra-session lows after producers in the offshore Gulf of Mexico halted 80% of crude oil output ahead of Hurricane Delta's landfall later this week.

Data from the Bureau of Safety and Environmental Enforcement revealed Gulf of Mexico producers shut-in approximately 80.42% or 1,487,699 barrels per day (bpd) of oil production as a result of Hurricane Delta. This compares with 29.22% a day ago.

Based on data from offshore operator reports submitted as of 12:30 p.m. EDT Wednesday, personnel have been evacuated from a total of 180 production platforms, or 27.9% of the 643 manned platforms in the Gulf of Mexico.

Hurricane Delta has weakened to a Category 2 Hurricane after landfall on the Yucatan Peninsula. DTN Weather forecasts it will emerge over the southern Gulf of Mexico and likely strengthen over the next 24 to 36 hours, likely approaching the central Gulf Coast as Category 3 strength.

On the session, November West Texas Intermediate futures faded below $40 barrel (bbl) to settle at $39.95 bbl, down 72 cents from Tuesday's close. The ICE December Brent contract declined 66 cents to settle just below $42 bbl.

NYMEX November ULSD futures dropped 2.78 cents or more than 2% to $1.1608 gallon settlement and November RBOB futures fell 3.42 cents to finish the Wednesday session at $1.2009 gallon.

Energy Information Administration data released at mid-morning Wednesday showed demand for motor gasoline jumped 367,000 bpd during the week ended Oct. 2nd to 8.896 million bpd -- the highest since quarantine measures to contain the coronavirus pandemic were first introduced mid-March.

The recent pop in gasoline demand is unlikely to extend into the fall months, however, due to high unemployment numbers and the lack of fiscal stimulus from the federal government.

Gasoline demand averaged just 8.672 million bpd during the peak demand summer months, down 9.3% versus the summer of 2019, highlighting the adverse impact to the economy caused by the pandemic.

Thursday's weekly initial unemployment claims are likely to understate the mounting turmoil in an increasingly unbalanced U.S. economy, with the Labor Department expected to report 819,000 first-time claims for unemployment insurance during the week ended Oct. 3, down from the previous week's reported 837,000 claims. The report won't include the populous state of California that took a 2-week pause in processing new claims to address a backlog and deploy new fraud technology.

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

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