Oil Futures Soften Before US Data on Rising COVID-19 Cases

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange edged lower early Friday as traders assessed prospects for a global demand recovery in the fourth quarter after several governments in the European Union reintroduced quarantine restrictions this week to limit the spread of rising coronavirus infections, once again limiting mobility and shuttering businesses. In addition, economic data in the United States illustrate an increasingly uneven recovery for the world's largest economy while additional fiscal stimulus remains elusive.

Friday morning, investors await key economic data for the United States, beginning with the Census Bureau's retail sales for September at 8:30 a.m. EDT followed by preliminary reading on consumer sentiment for October at 10:00 a.m. EDT. Both retail sales and consumer sentiment show a remarkable recovery over the past several months after its pandemic-caused collapse in April when the government mandated a nationwide lockdown. Retail sales have reached record highs in July and August fueled by $600 per week supplemental unemployment benefits and federal aid to small businesses, with expectations for those gains to have continued into September with sales estimated up 0.7% on the month.

On Friday, investors will find out whether retail sales and consumer sentiment have more room for improvement in an economy that is losing more than 800,000 jobs each week. The Department of Labor reported Thursday an unexpected uptick in last week's initial unemployment claims to 898,000 as several large employers, including theme parks and airlines among other businesses, announced layoffs this month.

This doesn't bode well for U.S. gasoline demand that typically has a high correlation with the labor market and discretionary spending. Gasoline demand, according to preliminary data from the Energy Information Administration, is down 13.1% cumulatively in 2020 through Oct. 9 against the comparable year-ago period, although only 7.5% lower during the most recent 4-week period. Upside for the RBOB futures is likely restrained until the employment situation shows improvement.

In early trading, November West Texas Intermediate futures slipped to trade near $40.60 barrel (bbl) and the December Brent contract down modestly to near $42.85 bbl. NYMEX November ULSD futures declined 1.28 cents to $1.1760 gallon and November RBOB futures fell 1.75 cents to trade near $1.1625 gallon.

The U.S. dollar index, which trades against a basket of six global currencies, was 0.3% lower at 93.600.

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

Liubov Georges