WTI Fades Below $40 as Rig Count Gains, Infections Rise

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- At the beginning of a new trading week, crude and refined products futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange declined in concert with falling equities amid growing fears that the " second wave" of coronavirus infections across the United States and the European Union will trigger tighter quarantine restrictions in the fourth quarter, inflicting deeper damages to economic activity and fuel demand.

In early trading, the December West Texas Intermediate futures dropped 85 cents to trade at $39 barrels (bbl) and the December Brent crude on ICE declined nearly $1 to $40.85 bbl. NYMEX ULSD November futures slumped nearly 3 cents to trade at a three-week low $1.1215 gallon and the front-month RBOB contract eased 1.5 cents to near $1.1235 gallon.

Markets grew increasingly concerned over what appears to be a steep slope of new coronavirus infections across the United States and the European Union, which has already triggered first nationwide restrictions on mobility and business operations since March.

On Sunday, Spain and Italy declared a national state of emergency, reintroducing nightly curfews and closing businesses sensitive to interpersonal contacts, such as gyms and pools. Czech Republic ordered its national borders shut Sunday and closed all nonessential businesses -- the move closely resembling the nationwide lockdown that took place back in March-April.

The impact of these restrictions was already evident in eurozone's economic data for early October, with consumer confidence across the 19-nation economic bloc souring to a negative 15.5 and services sectors falling back in steep contraction at a 46.2 reading. The reading of 50 separates contraction from expansion in business cycle.

Domestically, the number of new coronavirus infections spiked to a new record high of 83,000 a day over the weekend, bringing the seven-day average to the highest level since the pandemic first began eight months ago. Health officials have been warning for months that a second wave of infections in the winter months was inventible and could again test hospital capacity in several vulnerable states.

Libya's National Oil Company announced Sunday the lifting of force majeure on exports from ports of Es Sider and Ras Lanuf and said the country's crude production would reach 1 million bpd in four weeks. Libya pumped less than 100,000 bpd before General Khalifa Haftar lifted a blockade of oil facilities in September. Daily output reached 560,000 bpd last week and would rise to 800,000 bpd within a fortnight, the NOC said.

Offsetting some of this, offshore producers in the U.S. Gulf Coast of Mexico once again began evacuating personal and shutting down production platforms ahead of the landfall from the Tropical Storm Zeta that is now forecasted to reach U.S. Gulf Cost in hurricane strength on Wednesday.

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

Liubov Georges