WTI Futures Cut Loss as USD Wobbles, US Jobs Data Improves

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby month delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange ended mixed Thursday driven by an oscillating U.S. dollar that ended weaker and upbeat U.S. economic data that countered ongoing concerns over sagging fuel demand. West Texas Intermediate and Brent crude clawed back the lion's share of early losses and RBOB futures reversed higher, with the ULSD contact the complex's loss leader.

WTI futures for October delivery finished 14 cents lower Thursday after plunging to a 4-week spot low $40.37 bbl intrasession and November Brent crude ended 36 cents lower at $44.07 barrel (bbl). NYMEX October RBOB gasoline futures closed slightly higher at $1.2049 gallon and October ULSD futures underperformed the gasoline contract, falling more than 2% or 2.08 cents to a more than 2-month low on the spot continuous chart at $1.1677 gallon.

Market focus, however, remained on muted demand growth in the United States and elsewhere while global producers began to bring more supply into the market last month. Private survey Wednesday showed Organization of the Petroleum Exporting Countries raised output by about 1 million barrels per day (bpd) in August to 24.27 million bpd, with the largest increases coming from Saudi Arabia and other Gulf States. Russia, the second largest producer with the OPEC+ alliance, also hiked its output by 5% from the previous month to 9.86 million bpd, citing energy ministry data.

Meanwhile, U.S. fuel demand remains a major concern for oil investors after EIA data on Wednesday showed total product supplied, a proxy for demand, declined by more than 13% during the reviewed week at 16.98 million bpd -- the largest weekly decline in demand since the week ended April 3, and pressed the demand indicator to the lowest rate since the week ended May 29.

Otherwise, this week's economic data out of the United States was somewhat supportive for the oil market, indicating fuel demand still has some room to improve in coming months, albeit from a low baseline. U.S. initial jobless claims fell during the week ended Aug. 29 to the lowest since the pandemic started in March at 881,000, a decrease of 130,000 from the previous week's revised levels. The Labor Department said Thursday morning the number of continued unemployment claims, meaning the number of people receiving benefits for consecutive weeks, also dropped to a post-pandemic low of 13.254 million, down 1.238 million. Both readings came in better than analysts forecasted.

Weekly jobless figures came right before Department of Labor releases its monthly non-farm payroll report for August on Friday. Markets expect the government's nonfarm payrolls report to show a gain of 1.32 million new hires in August, slightly below the 1.8 million increase the previous month. The unemployment rate is forecasted to decline to 9.8% from 10.2% in July.

Economic activity in service sectors expanded for a third month in a row in August, albeit at a slower pace compared to previous months. The Institute of Supply Management reported Thursday morning its highly-watched services index slipped 1.1 points in August to 56.9, mostly in line with expectations.

"The past relationship between the Services PMI and the overall economy indicates that the Services PMIfor August (56.9%) corresponds to a 2.8% increase in real gross domestic product (GDP) on an annualized basis." said Anthony Nieves, chair of the Institute for Supply Management.

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

Liubov Georges