WTI, Brent Futures Fall as Traders Assess Q4 Demand Growth

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby delivery-month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange fell in afternoon trade Thursday, with the U.S. benchmark settling below $79 per barrel (bbl). The losses followed a widely expected decision from the Organization of the Petroleum Exporting Countries and Russia-led partners to increase production by a modest 400,000 barrels per day (bpd) next month. Traders are shifting their focus to more bearish factors, including a larger-than-expected increase in U.S. crude inventories and uptrend in COVID-19 infections across major oil-consuming economies.

On the session, NYMEX West Texas Intermediate for December delivery fell more than $2 to settle at $78.81 per bbl after trading as high as $83.42 per bbl earlier in the session, and the ICE January Brent contract declined $1.45 to $80.54 per bbl settlement. NYMEX RBOB December futures eroded 4.59 cents to settle at $2.2926 per gallon, and the front-month NYMEX ULSD futures slumped 2.79 cents for a $2.4066-per-gallon settlement.

Rebuffing calls to boost production more aggressively, OPEC+ stuck to its previous agreement to raise output in measured steps, boosting supplies by 400,000 bpd next month -- roughly the same amount the group added in October and November. OPEC+ currently withholds around 4.16 million bpd from the global oil market after 18 months of gradually unwinding their historic 9.7 million cuts introduced at the beginning of the pandemic. At the press conference following the announcement, Saudi Oil Minister Prince Abdul-Aziz Bin Salman said, "We believe that gradually increasing oil output is the best course of action. Projected 500,000 bpd in additional fuel demand from gas to oil switch has already occurred. Q1 2021 will also see massive stock builds."

Ahead of the ministerial meeting, the OPEC+ technical panel revised lower their expectations for how tight the global oil market will be in the fourth quarter, with the global supply deficit now seen at just 300,000 bpd in the three months ending in December. That's much smaller than the 1.1 million-bpd shortfall previously projected.

This week at a climate change summit in Glasgow, Scotland, U.S. President Joe Biden once again encouraged OPEC+ members to open the taps, blaming tight supplies for higher oil and U.S. gasoline prices. "It's unacceptable that Russia and Saudi Arabia are not going to pump more oil so people can have gasoline to get to and from work." The White House has reportedly asked OPEC+ to increase the size of its monthly supply hike to between 600,000 and 800,000 bpd, said delegates and diplomats.

Earlier in the session, the oil complex came under selling pressure from the batch of bearish economic data out of the Eurozone showing business activity in both manufacturing and service sectors fell to its weakest pace since the beginning of the post-pandemic rebound in July. "With supply shortages getting worse rather than better in October, manufacturing growth is likely to remain subdued for some time to come," said Chris Williamson, chief economist at IHS Markit. That leaves the eurozone's economy reliant on the service sector, and there are already signs that rising virus cases are dampening services activity in many countries, including Germany, Williamson continued.

The number of new COVID-19 cases in Germany topped its previous record high set in December 2020, with health officials reporting 34,498 new infections on Wednesday, nearly 700,000 higher than that Dec. 23, 2020, record. German health officials are set to meet Thursday to discuss the possibility of new restrictions for the unvaccinated. The news came one day after Health Minister Jens Spahn declared that Germany was living in a "pandemic of the unvaccinated" and that the fourth wave of the virus was "in full force" across the country. In China, meanwhile, the outbreak has now spread into 19 of the country's 31 provinces -- more than half the country, according to the National Health Commission. Chinese health authorities have lockdown more than 30,000 visitors to the Shanghai Disneyland theme park, forcing them to undergo COVID-19 testing after a single customer tested positive for the virus. China officially reported 93 new cases on Wednesday -- the highest daily count in three months and nearly double that reported at the beginning of the week.

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

Liubov Georges