WASHINGTON (DTN) -- Nearest delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange slumped in early trading Thursday, under pressure from a strengthening U.S. dollar and weak demand for refined fuels domestically as market participants await key economic data on the U.S. labor market and economic growth. Both reports are due out at 8:30 a.m. ET.
U.S. GDP data is likely to show a 35% contraction in the second quarter after declining 5% during the first three months of the year. If realized, that would mark the worst economic collapse on record as the country continues to battle the coronavirus pandemic.
Equity futures on Wall Street are positioning for a weaker open Thursday, with Dow Jones Industrial futures suggesting a 260-point slump and S&P 500 priced for a 31-point retreat. The GDP reading will coincide with weekly unemployment claims, which are likely to increase to around 1.45 million for the week ended July 25, offering further evidence that the recent virus resurgence is taking its toll on the domestic labor market. "The labor market has a long way to go to recover even with two strong months of job creation," said Chairman of the Board of Governors Federal Reserve Jerome Powell in his press-conference on Wednesday.
The Federal Open Market Committee ended its two-day policy meeting by keeping the fed funds rate unchanged at between zero and 0.25%, while reinforcing commitment to continue to do whatever it takes to keep the economy and financial markets running smoothly in months ahead. "Markets should not expect the Fed will cut back on its emergency facilities for a very long time," said Chairman Powell. He also warned that the economic recovery seen in early June has now stalled as evident in the recent consumer and jobs data. Index of consumer confidence fell to 92.6 this month from a revised 98.3 in June, well below market expectations. Mobility index data shows traffic volumes in the United States have now fallen well below that of Germany and Italy, while having registered no incremental improvement since roughly mid-June. Dallas Federal Reserve data confirms mobility and engagement index have begun trending lower in the past couple weeks after advancing sharply back in April-May.
Energy Information Administration data released Wednesday showed U.S. gasoline inventories increased unexpectedly last week by 653,984 million barrels (bbl) and distillate stocks were up 503,008 bbl to 178.4 million bbl, 31.3% more than this time last year. Six U.S. states reported record coronavirus deaths on Tuesday, adding to concerns that the resurgence could trigger fresh business and travel restrictions, as well as school closures. Against this backdrop, the Trump Administration is reported to have launched a new anti-virus campaign "embers strategy" in the country's hotspots that will include sending additional PPE equipment, test kits and top health officials like Anthony Fauci and Deborah Birx.
Near 7:30 a.m. ET, NYMEX West Texas Intermediate September futures dropped 79 cents to trade at $40.48 bbl and the international benchmark Brent crude September contract declined 69 cents to $43.06 bbl. NYMEX RBOB August contract slumped 1.97 cents to trade near $1.2218 gallon, while next-month delivery September contract expanded its premium to 2.95 cents. Front-month ULSD futures sagged 2.19 cents to $1.2320 gallon and contract for September delivery traded with a 0.75-cent premium.
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