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OIL FUTURES: Crude hits five-month lows as European lockdowns loom

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OIL FUTURES: Crude hits five-month lows as European lockdowns loom

Highlights

COVID surge blunts demand forecasts

Brent, WTI weakest since June

GOM crude output climbs as Zeta moves inland

New York — Oil futures were settled near five-month lows Oct. 30 as rising COVID-19 cases continued to weigh on demand outlooks.

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NYMEX December WTI settled 38 cents lower at $35.79/b, and ICE December Brent was down 19 cents at $37.46/b.

Front-month WTI last settled lower June 1, while Brent futures were the weakest since May 29.

The slide comes as Europe's two largest economies, Germany and France, prepare to enter partial one-month lockdowns aimed at halting a growing second wave of the pandemic.

RELATED: US Gulf oil and gas production, Louisiana refineries returning after Hurricane Zeta

European energy demand was already trending lower ahead of the lockdowns. Based on activity at workplaces, retail and recreational sites, and transport hubs, average mobility indexes in Germany, the UK, France, Italy, and Spain were 23.6% below pre-crisis levels in the week to Oct. 25, according to the latest Google data, marginally lower than the previous week and the lowest since Aug. 21.

New lockdowns threaten oil demand

Norwegian consultants Rystad Energy said it now expects European oil demand to contract by 10% of its current 13 million b/d of oil consumption in November, or more than 1 million b/d of demand.

"The pandemic's second wave, which was expected to arrive at some point in the second part of 2020, is now fully manifesting itself ... oil demand will lose ground as a result of the new lockdowns, with road fuels taking a significant hit as transport will be curtailed to the minimum again," Rystad said in a note.

A rising dollar added further pressure to energy prices. The ICE US Dollar Index was holding above 94 in early afternoon trading, the strongest since late September.

NYMEX November RBOB settled down 20 points at $1.0495/gal on Oct. 30, and November ULSD moved 71 points lower to $1.0813/gal.

In the US, the seven-day moving average of new COVID-19 infections climbed to a fresh all-time high of 76,302 on Oct. 29, according to data from The COVID Tracking Project. Apple Mobility data shows US driving activity has fallen back to the lowest level since mid-June.

Global oil demand will contract by 8.5 million b/d in 2020 and 5.8 million b/d in 2021, S&P Global Platts Analytics said in an Oct. 29 note, a downward revision of 200,000 b/d and 400,000 b/d, respectively, from its forecasts a month ago.

"In the US there are growing concerns over new COVID-19 cases, the outcome of the general elections, potential lockdowns and the state of the second stimulus bill, among other things," Platts Analytics said. "In Europe, many governments are reimposing restrictions. China's oil demand has recovered, but growth for the coming months is expected to be flat."

WTI sheds storm premium

WTI futures saw additional pressure as the market shed storm premiums in the wake of Hurricane Zeta. The Category 2 hurricane made landfall along the Louisiana Coast on Oct. 28 and at peak shut in around 85% of US Gulf of Mexico crude output Oct. 29. But operators were quickly restoring output as the storm moved further inland.

As of midday Oct. 30, around 1.23 million b/d of crude production remained offline, reflecting 66.3% of total US Gulf output, according to the US Bureau of Safety and Environmental Enforcement. About 35% of the Gulf's platforms and rigs, or 231 facilities, were evacuated, BSEE said, but only 155 remained evacuated Oct. 30.

Most of these oil volumes are expected to return throughout the weekend as producers redeploy their evacuated personnel.

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