Oil Futures Chase Equities Higher on Stimulus Hopes, Jobs
WASHINGTON (DTN) -- In afternoon trade Thursday, oil and refined product futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange turned higher in concert with surging equities after House Speaker Nancy Pelosi signaled progress towards reaching a deal in back-and-forth stimulus talks with the White House and unemployment claims unexpectedly dropped to the lowest level since the coronavirus pandemic shuttered the labor market eight months ago.
At settlement, the December West Texas Intermediate futures added 61 cents to $40.64 barrel (bbl) and December Brent crude on ICE gained 73 cents to $42.46 bbl. NYMEX ULSD November futures advanced more than 2 cents for a $1.1607 gallon settlement and the front-month RBOB contract gained 1.78 cents to $1.1581 gallon, bouncing off Wednesday's $1.1490 gallon 3-week low settlement.
U.S. equities surged and the U.S. Dollar Index strengthened after the number of first-time unemployment claim filings unexpectedly dropped below 800,000 to 787,000 during the week ended Oct. 17, according to data released Thursday morning by the U.S. Department of Labor. Claims from the prior two weeks were also revised lower, likely reflecting new data from California that paused processing first-time claims in mid-September to address fraud.
Thursday's unemployment data nullified what was thought to be a trend reversal week prior when the Labor Department reported an upturn in initial claims filings which were linked to increased coronavirus cases and the failure for Congress to pass more stimulus after some benefits expired over the summer.
Nearly 800,000 newly unemployed is certainly something not to cheer, and if the second wave of coronavirus infections in parts of the United States and Europe spread, there could be renewed lockdowns that further derail the U.S. economy that's already seen slowing in the fourth quarter following sharp growth estimated in the third quarter. Released Wednesday afternoon, the latest Beige Book from the U.S. Federal Reserve warned the U.S. economy expanded at a modest level at the end of the third quarter, and that employment growth slowed far below the pre-crisis level.
Energy Information Administration data Wednesday showed implied gasoline demand in the United States declined for a second week through Oct. 16 to the lowest weekly rate since mid-June at 8.289 million barrels per day (bpd). Constrained gasoline demand reflects high unemployment, and also caution by many in the country limiting trips to restaurants and elsewhere over concern about the coronavirus. EIA's disappointing demand statistics correspond closely with recent decrease in traffic volumes in the United States, with Apple mobility data showing driving activity has been trending lower in the most recent weeks.
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