Oil Futures Down on Weak Fuel Demand

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange settled Wednesday's session lower, sending the December West Texas Intermediate futures back to $40 per barrel (bbl). The losses came as traders assessed weakening fuel demand in the U.S. market against a backdrop of slowing economic growth and rising coronavirus infections with fiscal stimulus talks in Washington, D.C., hitting another roadblock.

In its Beige Book released Wednesday afternoon, the U.S. Federal Reserve said economic growth across 12 districts expanded at a slight to modest pace at the end of the third quarter, with activity remaining far below pre-crisis levels. The recovery is also seen as increasingly uneven as changes in activity varied greatly by sector. Even as the outlook remained mostly positive among those responding to Fed surveys, the economy clearly has a long and bumpy road ahead with long-lasting implications for fuel demand.

Energy Information Administration's inventory data released Wednesday for the week ended Oct. 16 was mostly bearish, detailing a sharp drop-off in demand for gasoline and distillate fuels, while refiners continued to cut back crude throughputs. At 8.289 million barrels per day (bpd), gasoline supplied to the U.S. market fell to the lowest weekly rate since mid-June, down nearly 14% versus a year ago. Distillate demand also moved sharply lower from its post-lockdown high of 4.2 million bpd, and output declined to a more-than-three-year-low 4.131 million bpd. Total product supplied remained down 13% on the year and over the past four weeks when compared with the year-ago period.

With coronavirus cases surging again in several U.S. states, fuel demand has little to no upside as we move through the fourth quarter, pressuring oil prices.

On the session, the December West Texas Intermediate futures dropped $1.67 to $40.03 per bbl, and December Brent crude on ICE declined $1.43 for a $41.73-per-bbl settlement. NYMEX ULSD November futures dropped 3.36 cents to $1.1399 per gallon and the front-month RBOB contract plummeted 4.76 cents to a three-week spot low $1.1403 gallon.

In Washington, Senate Democrats Wednesday blocked Republicans' attempt to pass a $500 billion coronavirus stimulus bill as House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin continued their talks on a relief deal before the 2020 election. U.S. President Donald Trump said earlier this week he would be willing to accept a larger stimulus package than the $2.2 trillion proposed by House Democrats. The situation remains fluid.

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

Liubov Georges