Crude Down 4% in March as Europe's Lockdowns Upend Recovery

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearest delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled the last trading session of March and the first quarter with steep losses. Traders look to Thursday's meeting among oil ministers of the Organization of the Petroleum Exporting Countries and producers outside of the cartel, with expectations for the alliance to extend ongoing production cuts for at least another month, offsetting a lackluster demand recovery in the European Union amid a third wave of coronavirus infections.

In market-on-close trade, West Texas Intermediate futures for May delivery plunged $1.39 or more than 2% to settle below $60 barrel (bbl) at $59.16 and the Brent May contract on ICE expired at $63.54 bbl. The June contact widened the contango in the prompt spread to settle down $1.43 at $62.74 bbl.

NYMEX April ULSD futures dropped 1.79 cents to expire at $1.7713 gallon and May futures settled at $1.7698 gallon. NYMEX RBOB April futures rolled off the board at $1.9533 gallon, with the May contract ending at a modest premium with a $1.9597 gallon settlement following a 3.64-cent loss on the session.

Wednesday's lower settlements follow reports that France announced a nationwide lockdown beginning next week, with the government directing the reclosing of schools and all nonessential businesses. New quarantine measures follow a steady rise in new infections despite Paris and adjoined regions enduring a partial shutdown that began a couple of weeks earlier.

Some sort of quarantine restriction is now in effect across much of continental Europe as the continent's vaccination campaign has proven woefully inadequate, banking on the AstraZeneca vaccine that governments have suspended multiple times because of concerns over blood clots. Europe's troubled vaccination campaign is unlikely to get resolved anytime soon, meaning a global recovery in oil demand may take much longer than expected.

The latest developments prompted the Joint Ministerial Monitoring Committee advising OPEC+ coalition officials to revise 2021 demand projections down by 300,000 barrels per day (bpd) for an annual growth of 5.6 million bpd, adding that "prevailing volatility in the market structure is a signal of fragile market conditions."

OPEC+ is expected to roll over 7.05 million bpd in production cuts for at least another month, with this week's reports indicating a two-month extension is also being considered.

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

Liubov Georges