DTN Oil

WASHINGTON (DTN) -- With U.S. dollar eroding to a one-month low, oil futures traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange rallied on Thursday after a batch of disappointing economic data joined with renewed mask mandates in several U.S. states and raised prospects of extended fiscal stimulus from the federal government and Federal Reserve in the second half of the year, fueling risk-on sentiment across broader markets.

Stocks on Wall Street jumped to record highs and the U.S. dollar dropped a steep 0.45% against a basket of foreign currencies after the Bureau of Economic Analysis reported U.S. gross domestic product in the second quarter expanded 6.5%, falling short of expectations for an 8.5% growth rate. First quarter GDP was also revised lower to 6.3% from 6.4% reported earlier.

Economists were calling on last quarter growth to mark the peak of U.S. post-pandemic recovery, with effects of government stimulus fading and supply constraints tied to pandemic disruptions seen slowing growth in the second part of the year. Rising consumer prices and labor shortages appear to have chipped away a larger chunk of last quarter's growth rate than expected despite trillions of dollars spent to fuel the economy.

Additionally, U.S. unemployment claims once again underwhelmed expectations, falling 24,000 last week to 400,000, with the previous week's initial filings revised 5,000 higher. States with the largest weekly increase in unemployment insurance claims include California, up 10,937, Nevada, up 2,434, and Tennessee, up 1,439. Continuing claims, meaning the number of Americans receiving unemployment benefits for consecutive weeks, rose to 3.27 million for the week ended July 17. The median estimate was 3.19 million claims.

Despite discouraging data, investors appear to have raised their bets on continued fiscal support from the federal government and Federal Reserve to keep the economy growing amid a resurgent pandemic. On Thursday, the White House called on Congress to pass an emergency extension of the Centers for Disease Control and Prevention's eviction ban, which expires in three days. At the same time, the Federal Reserve pledged this week to keep accommodative monetary policy in place until "substantial further progress" is made towards stable prices and maximum employment. The central bank decided not to raise interest rates from near zero or adjust the pace at which it buys government bonds each month.

"As long as COVID is running loose out there, as long as there is time and space for the development of new strains, no one's really safe. These strains, there's no reason they just can't keep coming...one more powerful than the next," said Fed Chairman Jerome Powell during a Wednesday afternoon news conference following the conclusion of a two-day policy meeting by the Federal Open Market Committee.

Oil futures rallied in market-on-close trade, with NYMEX September West Texas Intermediate jumping $1.23 to a two-week spot high at $73.62 barrel (bbl), and ICE September Brent futures settled a tad above $76 bbl, widening its premium against October contract to $0.95. NYMEX August RBOB contract rallied 4.32 cents or 1.9% to settle at $2.3514 gallon and next-month delivery September futures narrowed its discount to the expiring contact to 2.63 cents gallon. NYMEX August ULSD contract advanced 3.34 cents for a $2.1894 gallon settlement, with September futures near parity with August delivery at $2.1921 gallon. ICE September Brent, and NYMEX August ULSD and RBOB futures expire Friday afternoon.

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