Oil Futures Gain on Supportive PMI Data

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Boosted by a stronger-than-expected reading on business activity in the Eurozone, New York Mercantile Exchange nearby delivery month oil futures and front-month Brent crude on the Intercontinental Exchange edged higher in mid-morning trade Friday while a weakening U.S. dollar and progress on stimulus talks lent additional support amid fading prospects for economic recovery domestically.

Overnight data from the Eurozone gave markets much needed optimism heading into the early hours Friday with preliminary readings on German and French manufacturing activity showing return to growth this month. Data show business index from the 19-nation economic block hit a 54-point mark in early July, advancing more than 7 percentage points from the previous month. Businesses and consumers across the EU feel increasingly optimistic about the prospects for economic recovery following a massive stimulus package approved by EU leaders this week and effective measures taken to battle the pandemic.

In contrast, the United States hit a sobering 4 million cases of COVID-19 this week and the rising daily rate of confirmed cases and hospitalizations suggest the virus is far from under control, according to data from the Centers of Disease Control. Florida, Texas and California reported 60,000 new cases a day this week with infections rising in 25 U.S. states.

Coinciding with this trend, U.S. jobless claims jumped to 1.418 million last week, reversing the 15-week streak of consecutive declines.

Other high-frequency economic indications also point to the chilling effects of the virus resurface with data on mobility and engagement from Federal Reserve Bank of Dallas showing activity has slowed since mid-June.

High unemployment numbers and reduced economic activity weigh heavily on demand for gasoline and distillate fuels with the latest data from Energy Information Administration showing week-on-week declines in refined products consumption. The volume of petroleum products supplied to the domestic market fell by more than 800,000 barrels per day (bpd) last week and has not increased significantly since the middle of June.

Against this backdrop, refiners pulled back crude processing volumes by 140,000 bpd from the previous week to 14.2 million bpd, EIA data showed.

Near 9:30 a.m. EDT, NYMEX West Texas Intermediate September futures traded 20 cents higher near $41.28 barrel (bbl) and the international Brent benchmark gained 15 cents to $43.43 bbl. NYMEX August ULSD futures were little changed at $1.2512 gallon and front-month RBOB futures traded with modest gains at near $1.2607 gallon.

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

Liubov Georges