WASHINGTON (DTN) -- Nearby-delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Thursday's session lower. The losses came as traders monitored tightening quarantine restrictions in some of the hardest-hit U.S. states amid a record surge in coronavirus infections, stoking fear the renewed social distancing orders would degrade a recovery in domestic fuel demand.
The United States set another record high in new infections on Wednesday at more than 152,000, according to data published by the Centers of Disease Control. Several U.S. states, including New York, New Jersey and Illinois, have now reintroduced nightly curfews, tightened restrictions on contact-sensitive businesses and ordered remote learning for schools.
Starting Friday, Nov. 13, restaurants in San Francisco, San Diego and Los Angeles will have to shut down indoor dining, with all indoor gatherings restricted to 25 guests or 25% of room capacity.
Business owners around the country are worried about another round of shutdowns, which could include a nationwide lockdown as suggested this week by Dr. Michael Osterholm, Joe Biden's top health adviser.
Federal Reserve Chairman Jerome Powell, speaking at a European Central Bank forum, warned the next few months would be challenging as coronavirus spreads throughout the United States and the world.
Stocks on Wall Street fell sharply Thursday, sending Dow Jones Industrials down more than 300 points as the market's jubilant sentiment over successful late-stage vaccine testing announced by Pfizer and BioNtech on Monday gave way to a brutal reality of an expanding public health crisis.
Pointing to mounting COVID-19 infections in the European Union and the United States, the International Energy Agency on Thursday slashed 1.2 million barrels per day (bpd) from its fourth quarter demand forecast and 700,000 bpd from its first-quarter 2021 outlook. For 2020, IEA estimates global oil demand to average 91.3 million bpd, down 8.8 million bpd from the pre-COVID 2019 level, with demand next year projected to recover 5.8 million bpd to 97.1 million bpd, which is still 3 million bpd below 2019.
"It is far too early to know how and when vaccines will allow normal life to resume," said Paris-based energy watchdog in its monthly Oil Market Report released Thursday morning. "For now, our forecasts do not anticipate a significant impact in the first half of 2021."
In the near term, the poor outlook for demand and rising production from Libya, Iraq and the United States suggest weak market fundaments will continue to pressure oil prices for weeks to come.
Weekly inventory data from the U.S. Information Administration failed to push the oil complex higher on Thursday, detailing a surprise 4.3-million-barrel (bbl) build in commercial crude oil inventories and a sharper-than-expected 2.3 million bbl draw in gasoline stocks. Demand for motor gasoline moved sharply higher, adding 426,000 bpd to 8.762 million bpd while narrowing its year-on-year deficit to 6% from the previous week. Distillate stockpiles also declined a more-than-expected 5.4 million bbl from the previous week to 149.3 million bbl, still about 15% above the five-year average.
Total commercial petroleum inventories decreased by 11.5 million bbl last week.
On the session, the December West Texas Intermediate futures slipped 33 cents to $41.12 per bbl, and the January Brent contract on ICE declined 27 cents at $43.53 per bbl. December ULSD futures slid 1.25 cents to $1.2333 gallon, down from Wednesday's $1.2982 three-month spot high on the spot continuous chart. December RBOB futures settled down 1.88 cents at $1.1571 per gallon.
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