DTN Oil

WASHINGTON (DTN) -- Nearest delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange finished Friday's session with modest gains, underpinned by a weakening U.S. dollar and progress on stimulus negotiations in the European Union and the United States, while flaring tensions between Washington and Beijing kept gains in check.

On Friday, China ordered the U.S. to close its consulate in the southern city of Chengdu after the Trump administration told China to shut down its diplomatic mission in Houston. Tit-for-tat threats between the world's two largest economies further stoked concerns over demand growth this year, already under pressure from choppy recovery in the U.S.

Domestically, demand for refined fuels continues to show signs of slowing as parts of the country struggle to contain the spread of COVID-19. Energy Information Administration data for the week ended July 17 show gasoline supplied to the domestic market dropped for a second week, down nearly 100,000 barrels per day (bpd) to 8.550 million bpd, or 11.6% lower than a year ago. Meanwhile, distillate consumption sagged nearly 500,000 bpd or 13% to 3.223 million bpd and is now 24.4% lower compared to last year.

Other high-frequency data also point to derailed economic recovery, with mobility and engagement data compiled by the Federal Reserve Bank of Dallas showing activity has slowed since mid-June. Coinciding with this trend, U.S. jobless claims jumped to 1.418 million in the most recent week, reversing the downward trend that started in late March.

High unemployment numbers and reduced economic activity will most likely continue to weigh on the product demand in the near term, further pressuring oil prices.

On Friday, the NYMEX West Texas Intermediate contract for September delivery settled 22 cents higher at $41.29 barrel (bbl), notching a 1.2% gain on the week. ICE September Brent crude ended the session near unchanged at $43.34 bbl. NYMEX August ULSD futures settled marginally higher at $1.2563 gallon, advancing 2.9% since last Friday's settlement. The front-month RBOB contract rallied 2.62 cents to $1.2848 gallon, surging 4.7% this week.

The oil complex was lent some support earlier in the session from upbeat economic data out of the Eurozone, with the preliminary reading on German and French manufacturing activity showing a return back to growth this month. Data show business index from the 19-nation economic block hit a 54-point mark in early July, advancing more than 7 percentage points from the previous month.

Businesses and consumers across the EU feel increasingly optimistic about the prospects for economic recovery following a massive stimulus package approved by EU leaders this week and effective measures taken to battle the pandemic.

In the U.S., Senate Republicans and Democrats will continue negotiations on the fifth round of coronavirus aid package into next week. The Wall Street Journal reported Friday that Republicans will postpone the release of their $1 trillion legislation over disagreement to extend supplemental unemployment benefits. The $600 weekly supplement to state unemployment benefits is set to expire July 31, though will effectively end in many states this weekend.

The administration has requested additional time to review the fine details, but we will be laying down this proposal early next week, said Senate Majority Leader Mitch McConnell, R-Ky.

Liubov Georges can be reached at liubov.georges@dtn.com

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