DTN Oil

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange reversed higher in early morning trading Wednesday following an industry survey showing domestic refined fuel stocks fell by a larger-than-expected margin last week, while a continued retreat in the U.S. dollar index spurred by soft U.S. macroeconomic indicators further boosted the West Texas Intermediate contract.

The American Petroleum Institute reported late Tuesday that commercial crude oil inventories in the United States increased for the sixth consecutive week through March 1 amid a slow return of refining capacity disrupted by a combination of bad weather and seasonal maintenance. A 423,000 bbl crude build, however, was less than the markets expected.

Supply at the Cushing, Oklahoma tank farm, the New York Mercantile Exchange delivery point for WTI futures, also added 500,000 bbl last week.

Gasoline inventories, meanwhile, dropped by 2.8 million bbl in the reviewed week, which was twice an expected 1.4 million bbl draw. API further detailed that distillate inventory fell by 1.8 million bbl compared with an expected 400,000 bbl decrease.

Next, oil traders await the release of the official inventory report from the U.S. Energy Information Administration, scheduled for 10.30 a.m. EST.

Near 7:30 a.m. EST, West Texas Intermediate April futures on NYMEX advanced $0.70 to $78.82 bbl and the international crude benchmark Brent for May delivery added $0.47 to $82.51 bbl. NYMEX April RBOB futures rallied $0.0127 to $2.5446 gallon, and April ULSD futures eased $0.0094 to $2.5971 gallon.

In broader markets, the U.S. dollar extended losses, and equities on Wall Street shifted higher ahead of Federal Reserve Chairman Jerome Powell's first day of testimony on Capitol Hill along with a release of some key labor market data. Powell, who will first testify before the House Financial Services Committee, will likely be questioned on the state of the labor market and the progress on inflation towards the Fed's target of 2%.

The Institute of Supply Management's services index released Tuesday showed business activity across the largest sector of the U.S. economy unexpectedly cooled in February. While still in expansion territory, the ISM Services Index eased 0.8% from January to the lowest level in three months at 52.6. 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 that 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 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.

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