DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange overnight gains faded in early morning trade Friday, with that front-month gasoline contract trading modestly higher on the back of stronger-than-expected U.S. unemployment claims and improving demand for motor fuels.

U.S. gasoline consumption jumped to above 9 million barrels per day (bpd) last week, only the second time since the lockdowns were imposed nearly a year ago, suggesting driving demand and economic activity continued to improve this month.

Further supporting the demand outlook, the U.S. Labor Department on Thursday reported unemployment claims fell 39,000 from the previous week to 547,000, the best reading since the beginning of the pandemic. Texas, one of the nation's largest gasoline consuming states, reported a sharp weekly decline in initial unemployment claims at 23,357, followed by New York with a 17,316 falloff, and Florida and Georgia at 8,190 and 8,069, respectively. With more Americans getting vaccinated, the rehiring and reopenings of contact-sensitive businesses should pick up some pace in coming weeks.

U.S. Centers for Disease Control data shows 89.25 million Americans have now been fully vaccinated against the coronavirus, with around 219 million doses administered as of Thursday.

In Europe, a much stronger-than-expected reading of economic activity for the month of April showed manufacturing PMI reading of 63.3, the highest since 1997, as factories rebounded from last year's coronavirus shutdown.

The outlook for oil demand is improving in the U.S. and Europe but deteriorating in parts of Asia, with India and Japan reporting the highest daily COVID-91 cases since the beginning of global outbreak.

India's largest cities, New Delhi and Mumbai, announced this week new lockdown measures that are seen extending into adjoined regions amid a sharp uptrend in COVID-19 cases there.

Prime Minister Narendra Modi, however, ruled out the possibility of the second nationwide lockdown. New restrictions and the unknown nature of a 'second wave' of COVID-19 infections believed to have been triggered by a double mutant variant will likely weigh on the recovery outlook in the short term. Last month, India's crude consumption recovered to its pre-pandemic level according to the government data, with refiners processing 4.96 million bpd, up 1.8% from the previous month.

Near 8:30 a.m. ET, NYMEX June West Texas Intermediate futures slipped 10 cents to trade at $61.34 per barrel (bbl), and ICE June Brent futures edged down 15 cents to $65.24 bbl. NYMEX May ULSD futures traded little changed near $1.8618 gallon, while May RBOB futures traded lower to near $1.9718 gallon.

Brian L. Milne can be reached at brian.milne@dtn.co