WASHINGTON (DTN) -- Nearest delivery oil futures on New York Mercantile Exchange and Brent crude on Intercontinental Exchange fell sharply Thursday, with U.S. crude benchmark slipping below $38 per barrel (bbl) after commercial crude oil stocks rose to a record high in the most recent week and demand for refined fuels remain far below the 5-year average, while a full economic recovery is expected to take years before returning to pre-crisis level.
Federal Reserve Chairman Jerome Powell delivered a grim assessment of what looks to be a "long and patchy" recovery for the world's largest economy in the months ahead. "We are not even thinking about raising rates," said Powell during a news conference after the central bank left the federal funds rates unchanged between 0% and 0.25%.
Fed's dot-plot shows rates would remain near zero until at least 2022, highlighting the pessimistic outlook for the economy struggling to recover from the coronavirus pandemic that continues to weigh on consumer confidence, employment and inflation.
Thursday's headlines indicate a reemergence of COVID-19 virus in states that reopened their economies weeks ago, including Texas and Florida. Texas on Wednesday reported 2,504 new coronavirus cases, the highest one-day total since the pandemic emerged, Bloomberg News reported. Florida this week reported 8,553 new cases -- the most of any seven-day period.
Futures for Dow Jones Industrials dropped 589 points and the S&P 500 sank 59 points. U.S. dollar reversed higher from Wednesday's 95.705 three-month to trade near 96.235 in early index trade, mitigating recent support for the U.S. crude benchmark.
In early trading, West Texas Intermediate July futures dropped back $1.41 to near $38 bbl and Brent crude for August delivery tumbled $1.35 to $40.38 bbl. NYMEX RBOB July futures shed 3.7 cents to near $1.1725 gallon and ULSD July futures declined 2.89 cents to $1.1441 gallon.
Thursday morning, markets await weekly unemployment figures to be released by the Bureau of Labor Statistics at 8:30 a.m. ET, with first-time claims projected to ease to 1.56 million for the week ended June 6 from 1.877 million in the previous week, bringing the 11-week total to nearly 43 million.
Powell said Wednesday, "there will be a significant chunk, well into the millions of people who don't get to go back to their old jobs and there may not be a job in that industry for them for some time. It could be some years before we get back to those people finding jobs."
The Fed projects the U.S. unemployment rate to average 9.5% in 2020 before easing to 5% in 2021.
As of June 3, U.S. Chamber of Commerce reported nearly 80% of small business are now either fully or partially reopened. However, most believe it will take longer for the small business economic climate to return to normal: 55% of small businesses believe it will take six months to a year before normalizing, up from 50% last month and 46% two months ago. 71% of small businesses say they have the same number of employees as in February before the pandemic began. Among those that report having fewer employees now, more than half anticipate rehiring or bringing back most workers at some point in the next six months.
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