DTN Oil

WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled higher for the fifth consecutive session Thursday, with the advance lifting the U.S. crude benchmark to the highest settlement since October 2018 after a fresh batch of economic data showed unemployment claims fell to the lowest since the beginning of the pandemic and core capital goods orders rose above expectations in April, suggesting a sustained accelerated pace of economic growth.

U.S. economy expanded at an annualized rate of 6.4% over the first three months of the year, said the Bureau of Economic Analysis this morning, supported by surging consumer spending and expanded business investment. Based on the Atlanta GDPNow Model, the expansion accelerates in the second quarter to a 10.1% growth rate, with the acceleration mostly attributed to a broad-based pickup in economic activity.

Large states of New York and California announced plans to fully reopen their economies beginning next month in a move seen further spurring economic activity and fuel demand growth.

With the economy rapidly picking up speed, the number of Americans filing for first-time unemployment benefits fell for the fifth consecutive week through May 22 to 406,000. This was the lowest number of initial jobless claims since March 14, 2020, when it was 256,000. Labor market has long been a laggard in economy's ongoing recovery, with April's employment report grossly underwhelmed expectations with just 266,000 new jobs added. Critics attributed worse-than-expected employment numbers to extended unemployment benefits, citing the inability of many employers to compete with government payouts. A majority of Republican states this month have announced an end of beefed-up benefits from the federal government, which has likely contributed to improving jobless claims.

In another sign of improving macroeconomics, core capital goods orders, which exclude aircraft and military hardware, in the United States jumped 2.3% last month, rising the most in eight months, according to the Commerce Department. Total durable goods orders, however, fell 1.3% from the month earlier amid widespread supply bottlenecks.

The incoming data might support the view that the Federal Reserve is slowly but surely edging towards a discussion about tapering the central bank's $120 billion a month in bond purchases. During his speech at the Brookings Institute on Wednesday, Federal Reserve Vice Chairman Randal Quarles noted that medium term inflation risks are "weighted to the upside" on the back of the easy monetary policy from the central bank. Although "we need to remain patient" in any policy shift, Quarles said, "if my expectations about economic growth, employment and inflation over the coming months are borne out ... and especially if they come in strong ... it will become important for the [Federal Open Market Committee] to begin discussing our plans to adjust the pace of asset purchases at upcoming meetings."

Thursday's move higher is also underpinned by rapidly falling U.S. crude and petroleum product stocks as demand for gasoline surged to a fresh 14-month high. Commercial crude, gasoline and diesel fuel stockpiles now stand below their five-year averages, meaning the inventory overhang accumulated over the past year is all but gone.

On the session, NYMEX July West Texas Intermediate advanced 64 cents to $66.85 per barrel (bbl) and the front-month Brent contact on ICE gained 59 cents to $69.46 bbl ahead the July contract's expiration Friday afternoon. ICE August Brent settled at a 26 cents discount to the expiring contact. NYMEX RBOB June futures settled slightly higher at $2.1518 gallon, with the next month contract expanding its premium to 0.34 cents. NYMEX June ULSD was up 1.12 cents to $2.0564 gallon at settlement and the next-month ULSD futures contract settled at $2.0552.

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