OIL FUTURES: RBOB plunges 4% as US gasoline demand tests four-month lows

New York — NYMEX RBOB futures settled sharply lower Oct. 21 after US Energy Information Administration data showed a slowdown in gasoline demand led to an unexpected inventory build last week.

NYMEX November RBOB settled 4.76 cents lower at $1.1403/gal and November ULSD declined 3.36 cents to settle at $1.1399/gal.

Total US gasoline stocks climbed 1.9 million barrels last week to 227.02 million barrels in the week ended Oct. 16, according to EIA data. The US gasoline supply overhang had been steadily narrowing since early August, but last week's build reversed this trend, putting inventories 1.6% above the five-year average and eliminating a deficit that had persisted since late September.

The gasoline added to concerns that rising coronavirus infections could blunt the oil demand recovery. Gasoline stocks were broader higher across the eastern half of the country, areas that are all seeing increases in infections.

"In our opinion, concerns about demand amid record-high numbers of new COVID-19 cases and the possible restrictions to mobility that these may entail are soon likely to dominate what happens on the oil market," Commerzbank analysts said in a note Oct. 21.

While so far state governments have been reluctant to full lockdowns seen this past spring, some leaders, such as New York Governors Andrew Cuomo, are calling for limits on non-essential travel.

The seven-day average of new coronavirus infections nationwide reached 59,000 on Oct. 20, according to data from The COVID Tracking Project, the highest level since Aug. 4.

NYMEX December WTI settled $1.67 lower at $40.03/b and ICE December Brent declined $1.43 to settle at $41.73/b.

Commercial crude inventories fell for a second straight week last week, dropping 1 million barrels to 488.11 million barrels as production slipped lower and exports rebounded.

But the top line draw belies a nearly 1 million-barrel build in inventories at the NYMEX delivery point of Cushing, Oklahoma. Cushing stocks are up around 8 million barrels from a late-August nadir, and tanks there are now at 77% of working capacity -- the highest since early May.

Total crude production fell 600,000 b/d to 9.9 million b/d, the lowest since the week ended Aug. 28, while US crude exports surged 900,000 b/d to 3.04 million b/d. However, both these figures were colored by the lingering impacts of Hurricane Delta, which made landfall which made landfall in Louisiana Oct. 9.

The crude draw was also offset in part by weaker refinery crude demand. Total US net crude inputs were down 550,000 b/d to 13.03 million b/d, a six-week low, as utilization rates dropped 2.2 percentage points to 72.9% of capacity.