Oil Futures Mixed Ahead of US Retail Sales, Industrial Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- After a morning sell off triggered by renewed lockdown measures across the European Union and Russia, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange pushed higher in afternoon trade Monday as investors turned their focus to the release of key economic data domestically on Tuesday, with expectations for gains in October retail sales and industrial production to show continued U.S. economic growth despite rising inflation.

U.S. retail sales likely rose 1.1% in October -- a marked improvement from a 0.7% increase reported in the prior two months, data from the U.S. Census Bureau shows. There is a strong expectation that Americans would start their holiday shopping earlier this year, with supply disruptions and delivery delays everywhere. If so, this behavioral change would likely pull forward some demand from the November-December holiday shopping towards October, artificially boosting the numbers. U.S. Census Bureau will release data on last month's retail sales at 8:30 a.m. EST Tuesday.

Investors, meanwhile, continue to digest Friday's disappointing print on U.S. consumer sentiment released by the University of Michigan that plunged to a decade low this month, dented by surging inflation and lack of confidence in government policies to address it.

With inflation reaching its fastest pace in three decades at 6.2% in October, investors are betting the U.S. Federal Reserve will have to bring forward its first interest rate hike towards mid-2022 -- notably earlier than envisioned in prior forecasts. The CME Group's FedWatch tool is now pricing in a 68.8% chance of a rate hike by June of next year, with some betting on two or even three rate hikes in 2022.

Industrial production in October, to be released by the Federal Reserve 9:15 a.m. EST Tuesday, is expected to have increased 0.9% from a 1.3% decline in September, when Hurricane Ida disrupted the supply chain and factory activity in parts of the Southeast.

Earlier in the session, the oil complex came under selling pressure from headlines over renewed quarantine measures in the European Union, where COVID-19 infections surged to the highest level since the early days of the pandemic. The World Health Organization estimates coronavirus deaths rose by 10% in Europe in the past week, with low vaccination rates in central and eastern European countries seen as a main driver behind the surge. Russia -- with barely a third of the population vaccinated -- has seen a steady two-month uptrend in new COVID-19 infections and now leads the world in total coronavirus deaths for the first time since the start of the pandemic. Faced with a resurgent virus, Netherland, Austria and Russia announced partial lockdown measures to slow the viral spread ahead of the winter months. About two million people who have not been fully vaccinated against COVID-19 have been placed in lockdown in Austria starting Monday -- a measure that would surely dent mobility and gasoline demand in the country.

"We are not taking this step lightly, but unfortunately it is necessary," Austrian Chancellor Alexander Schellenberg said.

In Germany, where cases on Sunday surged to a new record of more than 50,000, the country's health minister, Jens Spahn, said the public health officials must do "everything necessary" to break the latest wave of the disease, Deutsche Welle reported. "The situation is serious, and I recommend that everyone takes it as such," he added.

The latest COVID-19 wave will likely bolster the view that the lingering impact of the pandemic will curb oil demand. The Organization of the Petroleum Exporting Countries last week said it expects global oil demand to average 99.49 million barrels per day (bpd) in the fourth quarter, down 330,000 bpd from their forecast in October.

On the session, NYMEX West Texas Intermediate futures for December delivery settled little changed at $80.88 barrel (bbl), and the Brent contract for January slipped $0.12 to settle a tad above $82 bbl. NYMEX RBOB December futures gained 1.74 cents to $2.3288 gallon and front-month NYMEX ULSD futures softened 0.56 cents to $2.3981 gallon.

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

Liubov Georges