Oil Futures Down on Expected Rise in COVID Cases, Fatalities

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent contract on the Intercontinental Exchange gave up earlier gains to settle Monday's session lower. The U.S. crude benchmark slid below $48 barel (bbl) amid bearish expectations over a post-holiday spike in coronavirus infections across the United States, while additional government stimulus signed into law by President Donald Trump over the weekend that is seen to boost demand for refined fuels capped the downside.

At settlement, NYMEX February West Texas Intermediate futures were down $0.61 at $47.62 bbl, with ICE February Brent falling below $51 bbl to $50.86 bbl. February Brent expires Wednesday, with the March contract trading near parity with February delivery. NYMEX January ULSD futures ended down 1.10 cents at $1.4790 gallon ahead of expiration Thursday, with the February contract settling the session at an 8-point premium. NYMEX January RBOB futures fell 1.12 cents to $1.3677 gallon ahead of expiration later this week, with February delivery at a 70-point contango.

Stocks on Wall Street charged higher Monday, now poised to end the year on a high note after Trump signed a long awaited $892 billion COVID-19 relief bill into law Sunday night. Trump's move to approve the rescue package for millions of individuals and small businesses has arguably reduced the likelihood of a double-dip recession early next year, while is also seen boosting consumer spending on the back of $600 checks for eligible Americans.

Federal Reserve Bank of Atlanta estimates the seasonally adjusted U.S. gross domestic product grew at a 10.4% rate in the fourth quarter, down from 11.1% seen on Dec. 17. After recent data releases by the National Association of Realtors, the U.S. Bureau of Economic Analysis, and the U.S. Census Bureau, the nowcast estimates private domestic investments decreased from 53.8% to 46.9% during the quarter, while real personal consumption expenditures increased from 4.8% to 5.1%.

Despite bullish sentiment in financial markets, oil futures failed to hold onto earlier gains Monday as traders turned their focus to a post-holiday surge in new COVID-19 infections in the United States, European Union and parts of Asia. Top U.S. health officials warned on Sunday the country is likely to see a fresh wave in virus-related fatalities following Christmas and New Year's celebrations that will further weigh on already lackluster demand for refined fuels in the world's largest oil consumer. The U.S. has posted at least 184,000 new infections per day ahead of Christmas weekend, according to data from Johns Hopkins University. While the pandemic is likely to worsen in coming days, nearly 10 million doses have already been distributed in the United States with about 2 million individuals receiving the first dose in the 2-dose vaccination program. The Centers for Disease Control and Prevention shows as of Saturday (12/26) morning, 9,547,925 doses of the vaccines have been distributed with 1,944,585 people receiving the initial dose of the vaccine.

Oil complex will likely struggle to find direction during the holiday-shortened trade week amid bullish economic and vaccine news and bearish expectations regarding rising COVID-19 cases and deaths.

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

Liubov Georges