Oil Futures Down on Stimulus Impasse

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange fell on Monday. Futures were weighed down by the lack of progress in fiscal stimulus talks in Washington even as several U.S. states, including California, the nation's most populous state, began restricting travel and business activity amid the recent surge in coronavirus infections.

U.S. implied gasoline demand fell to the lowest weekly rate in more than five months at 7.973 million barrels per day (bpd) during the Thanksgiving holiday week, according to official data published by the Energy Information Administration. With lockdown measures accelerating sharply across California -- the nation's largest market for gasoline -- traders anticipate U.S. fuel consumption to erode further heading into year's end, pressuring front-month oil contracts.

California announced Sunday sweeping new measures to slow the spread of COVID-19 infections, restricting movement for approximately 85% of its 40 million residents and shuttering all nonessential businesses for at least three weeks. All travelers outside the Golden State are now required to be quarantined for two weeks upon arrival within the state's borders.

Traffic data shows a steepening downtrend in road usage in California, with Apple's mobility index plunging to 50% below the Jan. 13 baseline preceding the announcement. Metropolitan Transportation Commission/Bay Area Toll Authority also reported toll usage across northern California was already 20% lower last week compared to a year ago, which is likely to erode further as restrictions begin to take a bigger bite out of the state's economy.

With less than a month left in 2020, Senate and House lawmakers still don't have a rescue package ready for millions of American households and businesses that are spiraling into deeper financial peril. On top of that, Democrats and Republicans are also facing a Dec. 11 deadline to pass a $1.4 trillion budget or risk a government shutdown. The House passed a one-week extension to continue funding the government until Dec. 18.

On its current trajectory, the U.S. economy is on track to contract in the first quarter of next year without additional federal aid, with the labor market flashing signs of sharp deterioration in the final weeks of 2020. On Friday, the U.S. nonfarm payroll report showed the U.S. economy added 254,000 new jobs in November -- the lowest rate during the recovery from the initial pandemic triggered business lockdowns.

On the session, major equity indexes retreated from their recent highs, with Dow Jones Industrials falling nearly 150 points and the S&P 500 Index ended down 0.19%. U.S. dollar index firmed on the session to 90.789, pressuring West Texas Intermediate futures.

NYMEX January WTI retreated 50 cents to $45.76 per barrel (bbl), and ICE February Brent futures declined below $49 per bbl to $48.79 per bbl. NYMEX January ULSD futures eased 0.3 cent to $1.3992 gallon, while the January RBOB contract shed 1.27 cents to $1.2558 gallon.

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

Liubov Georges