DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange registered losses in afternoon trade Friday following another weekly increase in the domestic rig count and emerging signs of a second nationwide lockdown after governors in nearly half of the U.S. states ordered quarantine measures to slow the spread of COVID-19 infections.

The U.S. oil rig count increased for the eighth straight week through Friday, adding 10 rigs to lift the total to a 5-1/2 month high 236, according to Baker Hughes. Most of the increase was realized in the prolific Permian Basin, which stretches from west Texas into eastern New Mexico, where seven rigs were brought into service since prior Friday to lift the total to 153 -- the highest rig activity since May 22. U.S. drilling activity continues to show signs of a gradual recovery from the pandemic caused nadir in April when the oil rig count collapsed by more than 200 in one month.

Oil prices came under pressure late this week after local governments in nearly half of the U.S. states ordered new quarantine restrictions and closure of contact-sensitive businesses. The recent spike in coronavirus cases now stands to overwhelm hospital capacity in some of the hardest-hit areas, with daily case count topping 150,000 on Thursday, according to data from Center of Disease Control. The City of Chicago issued a 4-week stay-at-home order this week, with New York City likely to follow with similar restrictions heading into the Thanksgiving holiday.

Federal Reserve Chairman Jerome Powell, European Central Bank President Christine Lagarde and Bank of England Governor Andrew Bailey all warned this week that absent of fresh stimulus efforts the EU and U.S. economies will face harsh winter reality of depressed output and widespread bankruptcies. These warnings, however, fell short on policymakers in Washington, D.C., where stimulus talks appear to have stalled once again this week. Reports indicate Senate Republicans and House Democrats remain far apart on the size and scope of a relief bill.

Angst over politics and the pandemic were reflected in Friday's consumer sentiment index from the University of Michigan, which fell sharply in early November to 77, well below consensus for a month-on-month improvement to 82. Consumers turned more negative this month following the outcome of the U.S. presidential elections and resurgence of COVID-19 infections.

"Interviews conducted following the election recorded a substantial negative shift in the Expectations Index among Republicans, but recorded no gain among Democrats. It is likely that Democrats' fears about the COVID resurgence offset gains in economic expectations: 59% of Democrats reported that their normal life had changed to a great extent due to the coronavirus compared with just 34% among Republicans," said Surveys of Consumers Chief Economist Richard Curtin.

Despite Friday's move lower, oil futures gained more than 8% this week on Monday's news of successful late-stage vaccine trials from Pfizer and BioNtech showed over 90% effectiveness in blocking the coronavirus in nearly 45,000 volunteers. The vaccine is currently on track for approval from U.S. Food and Drug Administration in the third week of November. The company said it could distribute the first 50 million doses by the end of the year and scale it up to 2.1 billion in 2021.

At settlement, the December West Texas Intermediate futures fell nearly $1 to $40.13 barrel (bbl) but added over $3 on the week, and the January Brent contract on ICE shed $0.75 from the previous session's close to $42.78 bbl, while posting a $3.34 weekly advance. December ULSD futures slid 2.91 cents to $1.2042 gallon and gained more than 6 cents this week, while front-month RBOB futures declined 3.17 cents to $1.1254 gallon, although gained over 4 cents this week.

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

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