DTN Oil

WASHINGTON (DTN) -- Reversing early losses triggered by expanded lockdowns in the European Union and Russia, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Monday's session higher after reports emerged that the Organization of the Petroleum Exporting Countries and ten partners outside the cartel are considering production cuts early next year to offset the demand hit from surging COVID-19 cases in the Northern Hemisphere.

Tightening quarantine restrictions across the EU present the biggest downside risk to the oil complex since the resurgence of Delta variant in the United States, according to traders, with mobility across the continent's largest cities reversing a recent uptrend.

A growing number of European governments announced this week mandatory restrictions to curb economic activity, prompting riots and protests across the continent. German Chancellor Angela Merkel said Monday that COVID-19 infections are at their highest since the beginning of the pandemic in the country and fresh restrictions are needed.

"By the end of this winter, more or less everyone in Germany will be vaccinated, cured or dead," the country's health minister Jens Spahn said. "That sounds cynical, but that is the reality."

The stark warning comes on the same day neighboring Austria and Netherlands enacted a fourth round of mandatory lockdowns, shutting all nonessential businesses and prohibiting people from leaving their homes except for emergency.

The World Health Organization estimates coronavirus deaths in Europe jumped 5% last week, making it the only region in the world where COVID-19 deaths increased.

The fourth wave of COVID-19 injections will likely erase a chunk of Europe's fuel demand heading into the end of the year, with traffic congestion in large European cities already seen on the decline in recent days.

Faced with a resurgent pandemic in Europe, OPEC+ might reconsider adding another 400,000 barrels per day (bpd) to the global oil market in January when the producer group meets on Dec. 2 for their monthly policy review, according to sources familiar with the talks.

This month, the alliance stayed on course in gradually boosting oil production 400,000 bpd per month since August, as agreed to in July, despite pressure from the White House to further increase output to curb rising oil prices. At that time, Saudi oil minister Prince Abdulaziz bin Salman called for a cautious approach in easing production curbs, adding the group will remain flexible in addressing the evolving pandemic.

Potentially supportive for the oil complex, high frequency data for the United States suggests fuel demand will likely climb to its pre-pandemic level this week in the lead up to the Thanksgiving holiday on Thursday. Transportation Security Administration reported Sunday passenger throughput at U.S. airports topped 2 million -- 12% below the level reported two years ago. Air travel is expected to be up 80% from last Thanksgiving. Demand for jet fuel in the United States has recovered nearly 70% from the pandemic-caused contraction, according to the Energy Information Administration.

In the most recent week, gasoline demand stood near 9.241 million bpd -- about 100,000 bpd above the five-year average.

On the session, NYMEX West Texas Intermediate futures for January delivery gained $0.81 to $76.75 barrel (bbl), and international benchmark ICE January Brent also added $0.81 in value for a $79.70 bbl settlement. NYMEX RBOB December futures rallied 4.83 cents to $2.2602 gallon and front-month NYMEX ULSD advanced 3.20 cents to $2.3254 gallon.

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