DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange were down sharply early Friday, although both crude benchmarks are still on course to close out February with gains of 18% and 19% as investors raised their expectations for growth and inflation later this year amid improving economic data and the likely passage of President Joe Biden's $1.9 trillion stimulus bill.

Biden's sweeping aid package, which includes a third round of stimulus checks and an extension of federal unemployment benefits, will face a full House vote on Friday after the House Budget Committee passed the bill on Monday, with all signs pointing to Congress approving the legislation. Democrats and Biden said they want to have the COVID-19 relief plan approved by March 14 when extra unemployment assistance and other pandemic aid expires. Should Internal Revenue Service keep up with the timelines from the previous two rounds of direct payments, Americans could start receiving stimulus checks from late March to early April. The new round of checks will cost the government an estimated $422 billion.

Expectations are calling for economic activity to pick up in the second quarter as vaccination efforts continue to accelerate, allowing for the economy to continue reopening a year following widespread government lockdowns due to the pandemic. The National Retail Federation estimates retail sales would grow at the fastest pace in over two decades this year, somewhere between 6.2% and 8.2% as vaccination efforts expand and consumer spending picks up.

"The trajectory of the economy is predicated on the effectiveness of the vaccine and its distribution," NRF Chief Economist Jack Kleinhenz said in a statement. "Our principal assumption is that the vaccination will be effective and permits accelerated growth during the midyear," he said. "The economy is expected to see its fastest growth in over two decades."

The Atlanta Federal District Bank's GDPNow model upgraded its first quarter forecast for U.S. gross domestic product to 9.5% as of Feb. 18, up from 4.5% seen earlier this year.

In another sign that economy is well positioned for an expected rebound, durable goods orders, a subset of retail sales, surged 3.4% in January after modest growth in the final months last year. Durable goods orders increased by the most since June 2020 when the economy first emerged from a nationwide lockdown, unleashing pent-up demand from weeks of quarantine in spring. These data points bode well for the economy's rebound for the second and third quarters.

Later Friday morning, investors will get a fresh look into consumers' sentiment for the final weeks of February, with The University of Michigan's Consumer Survey due out at 10:00 a.m. ET.

Near 7:30 a.m. ET, West Texas Intermediate futures for April delivery fell $1.19 to below $63 per barrel (bbl) at $62.38 bbl and April Brent futures on ICE traded just above $66 bbl ahead of expiration Friday afternoon. May Brent expanded its discount to the April contract to 87 cents in afternoon trade, trading near $65.13. NYMEX March ULSD futures dropped 2.96 cents or 1.5% to $1.8770 gallon, with the April contract expanding its discount 1 cent to the front month ahead of Friday's March contract expiration. Front-month RBOB futures declined to $1.8685 gallon, while the April contract traded with a steep 8.88-cent premium, reflecting the transition to lower Reid vapor pressure gasoline specifications next week.

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