DTN Oil

WASHINGTON (DTN) -- Nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Thursday mixed as stronger-than-expected retail and industrial data in the United States spurred late-afternoon gains in the dollar index, offsetting the bullish impact from the latest weekly inventory report showing solid drawdowns from domestic crude and petroleum product supplies.

Reversing some losses from the prior session, the U.S. Dollar Index rallied to a three-week high 92.925 on Thursday after August's retail sales unexpectedly increased 0.7%, tempering expectations for a sharp slowdown in the third quarter growth. Economists were mostly expecting retail sales to extend their recent decline a third consecutive month in August. Excluding automobiles, gasoline, building materials and food services, retail sales rebounded 2.5% last month after a downwardly revised 1.9% decrease in July.

Fresh data might suggest that despite tumbling consumer sentiment and the delta-driven surge in coronavirus infections, Americans are still eager to spend on back-to-school supplies and restaurants. The numbers overall reflected a more resilient consumer, with sales were up 15.1% from the same period a year ago.

Further evidence of a strengthening economy could be found in weekly unemployment claims data released Thursday morning by the Department of Labor, showing applications for unemployment benefits increased slightly but held near the pandemic's low 332,000 as of Sep. 11. Despite the resurgent pandemic, employers have largely resisted laying off workers in a tight labor market. The number of people continuing to receive benefits after an initial week of aid fell 187,000 to 2.665 million in the week ended Sept. 4, the lowest level since mid-March 2020.

Last week's modest increase in jobless applications were likely boosted by Hurricane Ida, which devastated U.S. offshore energy production and knocked out power in Louisiana. Ida also drenched Mississippi and caused historic flooding in New York and New Jersey.

Markets are closely monitoring incoming data on the economy's performance in the third quarter to determine the Federal Reserve's next move on phasing out pandemic-era stimulus. The Federal Reserve currently buys $120 billion a month in bond and mortgage-backed securities to ensure market liquidity and free flow of credit. Fed officials have said in recent interviews and public statements that they could begin tapering asset purchases later this year, although gave no details on an exact timeline. While they are unlikely to do so at their meeting Sept. 21-22, Fed Chairman Jerome Powell could use that gathering to signal they are likely to start the process at their following session Nov. 2-3.

Limiting the downside for the oil complex, Wednesday's inventory report from the U.S. Energy Information Administration showed commercial crude-oil supplies fell by a massive 6.4 million barrels (bbl) last week compared with calls for a smaller 2.5 million bbl drop. At 417.4 million bbl, domestic crude supplies now stand about 7% below the five-year average. The larger-than-expected crude draw came as refinery ran rates nationwide increased just 0.2% on the week and domestic production gained a modest 100,000 barrels per day (bpd) after plunging 1.2 million bpd in the prior week. Gasoline stockpiles fell a less-than-expected 1.9 million bbl with demand for the motor transportation fuel tumbling 7.5% to 8.892 million bpd.

Demand for distillate fuels, often seen as a proxy for economic activity, edged higher by 110,000 bpd from the previous week to 3.795 million bpd. Distillate stockpiles declined by 1.7 million bbl to about 13% below the five-year average at 131.9 million bbl.

Total inventories of crude and petroleum products declined by 10 million bbl from the previous week, EIA reported.

On a session, the NYMEX October West Texas Intermediate contract settled unchanged at $72.61 bbl after adding more than $2 on Wednesday, and Brent crude for November delivery edged up $0.21 to $75.67 bbl. NYMEX October RBOB futures declined 2.54 cents to $2.1812 gallon, and front-month ULSD futures gained 0.57 cents to $2.2110 a gallon settlement.

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