DTN Oil

WASHINGTON (DTN) -- In early trade Friday, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange fell more than 1% after overnight data from the European Union showed the bloc's economy contracted during the first quarter amid re-imposed lockdown measures and botched rollout of coronavirus vaccines, while renewed strength in the U.S. dollar further weighed on the oil complex.

The U.S. Dollar Index, which tracks the greenback against a basket of six global currencies, was 0.2% higher near 90.795 in early trade, finding support from a weaker-than-expected gross domestic product reading for the European Union showing the collective economy fell into recession during the first quarter. Eurostat reported output for the 19-nation economic bloc shrank 0.6% during the January-March period following another contraction in the final three months of 2020, meaning the economy has technically fallen into recession. A recession is identified by two consecutive quarters with negative GDP. Germany, the bloc's largest economy, shrank 1.7%, preceded only by Portugal and Latvia, down 3.3% and 2.6%, respectively.

Against those headwinds, a host of high-frequency data, including restaurant reservations and traffic congestion in the bloc, showed a rapidly improving economy helped by a faster rollout of vaccines and easing of COVID-19 restrictions. A survey released Thursday showed businesses feel increasingly optimistic about the future strength of the economy, with the economic sentiment indicator smashing expectations by 10.7 points.

Eurozone's data released this morning contrasts sharply with the U.S. economy, which expanded at a 6.4% annualized rate in the first quarter after growing 4.2% in the final three months of 2020. The sharp increase was led by personal consumption -- by far the largest component of the U.S. economy, which spiked 10.7% in the first quarter. Business investment, the second largest component of GDP, also had a strong showing in the January--March period, up 9.9% from the previous quarter.

The rising demand, however, has been met with unpreceded disruptions in global supply chains, leading to material shortages and firms unable to replenish dwindling inventories. Two components of GDP growth -- change in private inventories and net exports -- declined from the final months of 2020, weighing on first-quarter growth.

Net exports of goods and services subtracted 0.87% from GDP, while the change in private inventories subtracted 2.64% from the expansion.

In early morning trade, NYMEX June West Texas Intermediate futures fell below $64 per barrel (bbl), down $1.19 from Thursday's six-week high settlement of $65.01 bbl, and ICE June Brent futures declined $1.05 to trade near $67.52 bbl ahead of the contract's expiration Friday afternoon. Next-month delivery July ICE Brent futures expanded its discount to $0.58 to trade near $67 bbl. NYMEX May ULSD futures dropped 3.23 cents or 1.6% to $1.9291 gallon, with next-month delivery contact trading with a 0.27 cents premium. NYMEX May RBOB futures traded little changed near $2.0956 gallon with the June contract trading at a 2.23 cents discount to expiring contact.

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