The oil complex took another day of heavy selling on Wednesday as investors continued to flee risky assets amid growing uncertainty over a second wave of coronavirus infections that are leading to lockdowns in Europe joined by the divisive U.S. presidential election.
Markets took a deep dive after reports emerged Germany and France, the Eurozone’s largest economies, will likely go into a month-long lockdown in coming days as governments struggle to contain the spread of coronavirus. Germany’s government confirmed Wednesday afternoon it will close all bars and restaurants for four weeks, while details of a proposed lockdown in France have yet to be unveiled. The impact of new restrictions will undeniably cut deep into the nascent economic recovery for the 19-nation bloc, with the French economy now projected to contract in the fourth quarter.
Domestically, major investment banks revised lower U.S. gross domestic product forecasts for the current quarter to below 5%, citing the inability of Washington lawmakers to reach a stimulus deal, while rising coronavirus cases across parts of the country threaten business activity. The step down in growth follows a robust third quarter for the U.S. economy that is estimated to have grown at a record pace, with the Atlanta Fed GDPNow projecting 37% annualized growth. U.S. Bureau of Economic Analysis will release its first estimate for third quarter GDP 8:30 a.m. EDT Thursday.
The oil futures selloff Wednesday accelerated after the Energy Information Administration reported commercial crude oil supplies jumped 4.3 million bbl during the week ended Oct. 28, well above market expectations for a 900,000 bbl increase. The build came despite greater export demand and increased refinery inputs, with domestic production surging a whopping 1.2 million barrels per day (bpd) to a 3-month high 11.1 million bpd.
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