DTN Oil

WASHINGTON (DTN) -- At the beginning of a holiday-shortened trade week, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange moved mixed, with expanded COVID-19 restrictions across European Union and chatter of potential Strategic Petroleum Reserve releases in Japan and China countering signs of strengthening fuel demand in the United States, with the number of Americans taking to the roads for the Thanksgiving holiday this week projected to reach pre-pandemic levels.

High-frequency data suggests fuel demand in the United States will likely climb to its pre-pandemic level this week in the lead up to the Thanksgiving holiday on Thursday, with American Automotive Association projecting over 50 million Americans will hit the road this week. Furthermore, 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 already 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 barrels per day (bpd) -- about 100,000 bpd above the five-year average. If gasoline demand follows pre-COVID seasonality, it would trend lower through the fourth quarter before a final surge amid the Christmas holiday.

Contrasting with reopenings in the United States, several European countries expanded COVID-19 restrictions this week in their bid to slow the viral spread heading into holiday season. Austria announced a fourth nationwide lockdown starting Monday, becoming the first EU country to take such a measure in the face of the COVID-19 resurgence.

The announcement came days after Chancellor Alexander Schellenberg introduced a targeted lockdown for unvaccinated -- a measure that was widely expected to be insufficient to contain the viral spread. Additionally, Germany -- the EU's largest economy -- will introduce next week tighter COVID-19 restrictions on unvaccinated citizens, with most regions already barring unvaccinated citizens from public places such as restaurants and concert halls.

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

The fourth wave of COVID-19 injections will likely bite 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. Organization of the Petroleum Exporting Countries earlier this month cut its global demand projection for the fourth quarter by 330,000 bpd, citing resurgent pandemic as one of the reasons behind the downgrade.

The bearish headlines in European Union, coupled with reports the United States and other major oil consuming countries are considering a sale from strategic oil reserves have worked against the narrative of a tightly supplied market. Overnight media reports in Japan suggest the fourth largest oil consuming nation is working around current regulations to sell a portion of oil reserves held by the government.

Last week, the oil complex came under selling pressure from reports China is carrying out a second public auction of state crude oil reserves although no specific details on the size of that sale were released. China rolled out its first release from reserves in September, which was equal to roughly 7.38 million barrels (bbl). Analysts estimate the second SPR release will likely match the sale from two months ago. Energy Aspects estimates China's state oil reserves hold about 220 million bbl of crude oil, equivalent to 15 days of demand.

Near 7:45 a.m. ET, NYMEX West Texas Intermediate futures for January delivery traded near $75.84 bbl, and international benchmark ICE January Brent declined $0.15 to $78.76 bbl. Both benchmarks fell as much as 3% last week. NYMEX RBOB December futures gained 0.79 cents to $2.2198 gallon and front-month NYMEX ULSD added 0.74 cents to $2.3056 gallon.

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