Oil Futures End Mixed Thursday

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Brent crude contract on Intercontinental Exchange settled Thursday's session mixed, with the crude contracts falling during market-on-close trade, while oil products registered gains on the session spurred by optimism that fuel demand would expand as states reopen their economies.

NYMEX June West Texas Intermediate reversed down from a $26.74 four-week high on the spot continuous chart to settle $0.44 lower at $23.55 per barrel (bbl), while the July Brent contract consolidated within Wednesday's trade range before settling $0.26 lower at $29.46 bbl.

NYMEX June ULSD futures settled $0.0131 higher at $0.8371 gallon amid inside trade. June RBOB futures rallied to an eight-week high on the spot continuous chart at $0.9648 before settling with a $0.0545 gain at $0.9314 gallon, the highest settlement for the spot-month gasoline contract since U.S. President Donald Trump declared the COVID-19 pandemic a national emergency on March 13.

RBOB futures again flattened an atypical contango market structure for this time of year as gasoline demand continues to increase weekly since falling to a 5.065 million barrel-per-day (bpd) nadir during the week-ended April 3. Energy Information Administration Wednesday reported gasoline supplied to the U.S. market surged 804,000 bpd to 6.664 million bpd during the week-ended May 1, up 1.599 million bpd or 31.6% over the four-week period.

Gasoline demand is expected to continue to increase in the coming weeks as a locked down society is freed by community and state re-openings. And while this trend should continue in the coming weeks, gasoline supply is only down 2.6% from a 39-year high at 263.2 million bbl reached April 17 and the upside in gasoline consumption will be capped by lost jobs, a deep economic contraction, and likely behavioral changes in response to COVID-19. In one such example, Facebook said Thursday it will let most employees work from home through the end of 2020.

The U.S. dollar reversed down from a two-week high in index trade today ahead of Friday's employment report, which will be horrific. The nonfarm payroll report is expected to show job losses of 21.5 million occurred in April after 701,000 people lost employment in March, with the national unemployment rate seen up 12% from month prior to 16.4%.

Lost employment continued into early May, with the Department of Labor Thursday morning reporting 3.169 million people filed for unemployment insurance for the first time during the week-ended May 2. That's the seventh consecutive week with initial jobless claims above three million, with 33.4 million having filed for unemployment insurance for the first time over the period.

News broke on Thursday that top representatives from the United States and China will meet next week on implementing the Phase One trade deal reached in January. Trump has threatened to terminate the deal and implement tariffs if Beijing doesn't meet terms of the agreement, including purchasing $250 billion of U.S. goods.

Relations between Washington and Beijing have become increasingly chilly since the accord, with Trump blaming China for not being forthright about the coronavirus, while U.S. Secretary of State Mike Pompeo said COVID-19 escaped from a laboratory in Wuhan.

Crude futures were lent support in early hours after Saudi Arabia unexpectedly increased the kingdom's Official Selling Price for June for buyers in Asia. The higher OSP comes as the kingdom needs to sharply reduce its crude production, which reached a record high 11.3 million bpd, to meet an 8.5 million bpd quota under an April 12 OPEC+ agreement. Separately, the United States will withdraw its Patriot Missile system from Saudi Arabia, according to the Wall Street Journal.

Brian Milne can be reached at brian.milne@dtn.com

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