DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange continued lower in afternoon trade Friday, with the prompt-month West Texas Intermediate contract retreating 2%. The losses came on weaker-than-expected jobs and retail data in the United States, the world's largest oil consumer, with losses accelerating after industry data showed the number of active drilling rigs domestically increased for the eighth consecutive week through Friday, Jan. 15.

Baker Hughes on Friday afternoon reported the number of oil rigs actively drilling in the United States climbed to the highest level since the first week of May at 287, up 12 from the prior week, but down 386 from the comparable week a year ago. Texas has led the gains, adding eight rigs from the previous week, followed by Louisiana with four.

On the session, NYMEX February WTI futures retreated $1.21 from Thursday's 11-month high settlement of $53.57 per barrel (bbl) on the spot continuation chart and the March Brent contact on ICE moved down $1.32 to $55.10 per bbl. NYMEX February ULSD futures dropped back 2.65 cents to $1.5929 per gallon, with front-month RBOB futures declining 2.55 cents to $1.5284 per gallon.

Friday's lower settlements follow a string of frail economic data in the United States this week, beginning with an alarming jump in unemployment claims and a larger-than-expected decline in December's retail sales and weakening consumer sentiment.

Department of Commerce data reported Friday retail sales fell for the third month in a row in December, down 0.7% after a 1.4% decline the month prior -- an unusual downtrend for the holiday shopping season. That might suggest consumers are cutting back on discretionary spending as concerns grow over the economy's shaky recovery and the end of federal assistance programs enacted to offset the economic harm caused by pandemic-forced business closures. The worse-than-expected reading on consumer spending comes in the wake of alarming data in the labor market, showing the number of Americans filing for first-time unemployment benefits jumped to near 1 million last week -- the highest weekly rate since the end of March.

Earlier this week, Federal Reserve said in its Beige Book economic activity across 12 federal districts flatlined and in some cases declined under pressure from surging coronavirus cases and related shutdowns. The United States set a new record high for virus-related deaths this week, losing more than 20,000 lives to the pandemic as new infections surged to 1.7 million, up 17% from the previous week. Former U.S. Food and Drug Administration Chief Scott Gottleib, however, said new cases could start declining in February.

Oil traders consider these data points, as it directly affects demand for gasoline and other refined fuels in a service economy like the United States. Government data released Wednesday showed gasoline supplied to the U.S. market stalled near a seven-month low 7.532 million barrels per day (bpd) in the most recent week, with a four-week average down near 11% against a year ago. High-frequency mobility data suggests traffic activity across major metropolitan areas showed no improvement at the beginning of the year and passenger throughput in the U.S. airports declined sharply after the holiday surge.

With the economy's recovery stalling, President-elect Joe Biden officially unveiled his plan for a $1.9 trillion stimulus plan, "America's Rescue Plan," that includes $1,400 direct checks to Americans, on top of the $600 checks going out from the just-passed $900 billion stimulus. The plan also calls for an increase in jobless benefits by $300 and boosting the federal minimum wage to $15 an hour.

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