DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange settled lower for the second straight session on Tuesday following a pair of U.S. macroeconomic reports showing the economy might have slowed more than previously expected during the first quarter, spurring bets for an earlier start to a rate-cutting cycle by the Federal Reserve.

Business activity across the U.S. services sector, accounting for roughly 70% of gross domestic product, unexpectedly cooled in February, according to data released Tuesday morning by the Institute of Supply Management (ISM). While still in expansion territory, ISM Services Index eased to the lowest reading since November 2023 at 52.6, which was 0.8% below January. Interestingly, the Employment Index contracted for the second time in three months in February with a reading of 48%, a 2.5% decrease from 50.5% recorded in January. Similar labor dynamics are already evident in the goods-producing side of the economy, which has remained in recession for 16 consecutive months through February. The employment sub-index in ISM Manufacturing deteriorated to 45.9% last month.

Fresh macroeconomic data might suggest the U.S. labor market, which has provided bedrock support for economic growth in recent years, might be weakening under the weight of high-interest rates.

Investors will get a deeper look at labor market dynamics with weekly unemployment claims due out Thursday morning and February's non-farm employment report scheduled for a Friday morning release.

January factory orders sank to -3.6% in January from a downward revised 0.3% drop in December, underpinned by weak consumer demand for manufactured durable goods and transportation equipment. New orders for manufactured goods in January were down three of the last four months.

Separately, U.S. commercial crude oil inventories likely increased for a sixth consecutive week through March 1 amid a laggard return of domestic refinery utilization following the lingering effects of bad weather on refinery operations in January, unscheduled shutdowns and seasonal maintenance. A consensus of analysts surveyed by the Wall Street Journal said commercial oil stocks increased 1.3 million barrels (bbl) last week following a 4.2 million bbl build reported in the previous week. Refinery capacity use is expected to have risen 1% to 82.5%, according to the survey. Over the last four weeks, U.S. refiners processed an average of 14.657 million barrels per day (bpd), 449,000 bpd less than the comparable four-week average period in 2023.

Gasoline inventories are estimated to have been drawdown 1.4 million bbl while stocks of distillate fuels, which is mostly diesel, are seen to have fallen by 400,000 bbl.

The American Petroleum Institute will release its weekly inventory report at 3:30 p.m. CST, followed by official data from the U.S. Energy Information Administration on Wednesday morning.

At settlement, West Texas Intermediate April futures on NYMEX retreated $0.59 to $78.15 bbl, continuing a retreat from Friday's $80.85 four-month high on the spot continuous chart. International crude benchmark Brent for May delivery declined $0.76 to $82.04 bbl. NYMEX April RBOB futures fell back $0.0529 to $2.5328 gallon, and April ULSD futures declined $0.0407 for a $2.6065 gallon settlement.

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