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OIL FUTURES: Crude weakest since June amid coronavirus-dimmed demand outlooks

Highlights

European lockdowns weigh on outlook

US third-quarter GDP climbs 33.1%

Zeta shuts in 85% Gulf crude output

New York — Oil prices settled at the lowest level since early June on Oct. 29 as demand outlooks dimmed in the face of rising coronavirus cases that have sparked broad lockdowns in Europe.

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NYMEX December WTI settled $1.22 lower at $36.17/b, and ICE December Brent was down $1.47 at $37.65/b.

Energy prices turned sharply lower in overnight trading after France and Germany both announced nationwide lockdowns on Oct. 28 in a bid to stem a rising tide of new infections, stoking concerns that more restrictions could be coming to areas with similar coronavirus trajectories.

In the US, the seven-day moving average of new coronavirus infections climbed to a fresh all-time high 74,096 on Oct. 28, according to data from The COVID Tracking Project.

Front-month WTI settled below the 200-day moving average, a key technical indicator, for the first time since Oct. 2. Implied volatility, a measure of downside risk in the market, for front-month WTI climbed to 57.88% Oct. 29, the highest since late May.

NYMEX November RBOB settled 2.99 cents lower at $1.0515/gal and November ULSD settled down 2.58 cents at $1.0884/gal.

But oil prices pulled off session lows in early US trading following more bullish than expected US economic data.

US Commerce department data showed third-quarter GDP surged 33.1%, or $1.64 trillion, to $21.16 trillion. The increase exceeded market expectations and nearly erased a $2.04 trillion GDP slide in the second quarter.

Further buoying market sentiment, US weekly unemployment claims fell 40,000 to 751,000 in the week ended Oct. 24, US Labor Department data showed.

"The US data was just the excuse used to pare losses, but really energy traders wanted to defend the lower boundaries of the trading range that has been in place since June," OANDA senior market analyst Edward Moya said in a note. "Lockdown headlines will continue to dictate how bad the crude demand outlook crumbles."

Front-month WTI and Brent last settled lower on June 1 and May 29, respectively.

US energy prices also saw some support from production shut ins due to Hurricane Zeta, which made landfall on the Louisiana coast Oct. 28.

As of midday Oct. 29, the storm had shut in an estimated 1.57 million b/d of crude production reflecting 84.8% of US Gulf output, according to the US Bureau of Safety and Environmental Enforcement. The Category 2 storm also caused disruptions at Shell's 227,400 b/d Norco Refinery, PBF Energy's 190,000 b/d Chalmette Refinery and potentially others, but damages were limited and the restart processes have begun, the companies said.

Outsized declines for Brent futures narrowed the ICE WTI-Brent spread to around minus $1.50/b in afternoon trading, testing levels last seen in early April.