WTI Futures Shrug at Stronger US Dollar, Rally on Recovery Bets

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and the Intercontinental Exchange extended their winning streak into a fourth consecutive session Thursday, with both crude benchmarks trading at better than one-year highs despite a strengthening U.S. dollar and lingering concerns over a sluggish demand recovery in the first quarter, as investors look towards stronger economic activity in the second half of the year powered by improving macroeconomic data and increased availability of COVID-19 vaccines.

In early trade, West Texas Intermediate futures for March delivery added 38 cents to trade just above $56 per barrel (bbl), while front-month Brent futures on ICE gained a like amount to near $58.80 bbl -- a fresh 13-month high on spot continuous chart. NYMEX March ULSD edged 0.58 cent higher to $1.6965 gallon and the RBOB contact for March posted fractional gains to trade at $1.6495, paring an overnight advance to a one-year high $1.6615 gallon after rallying over 2% in the previous session.

U.S. Dollar Index climbed to the highest levels since early December 2020 at 91.490, up 0.3% against a basket of global peers in overnight trade. Greenback's advance, however, failed to pause this week's rally across financial and oil markets as investors appear to have increased their bets for a faster economic recovery in the United States as opposed to the European Union and emerging markets. Recent economic data certainly suggests so, with weekly unemployment claims easing after reaching nearly one million in early January while managers in charge of buying supplies for U.S. companies reported increased business activity last month amid robust demand for new orders.

The next major update on the economy comes on Friday with the Labor Department's release of its monthly nonfarm payroll report for January, with median consensus calling for a 50,000 increase in new hires after December's 140,000 drop. Automatic Data Processing showed Wednesday private payrolls increased last month by a much larger than expected 174,000, with most growth coming from medium-sized businesses in leisure and hospitality.

Selected high frequency data, such as restaurant bookings and mobility data, also point to a strengthening labor market and service sector, as virus infections ease and business restrictions are being lifted. Centers for Disease Control and Prevention this week said more Americans have now received at least one dose than have tested positive for the coronavirus since the pandemic began. So far, 35 million doses have been administered, according to state-by-state data, with this week's rate of daily inoculations averaging 1.34 million doses. The next round of shots, beginning next week in some states, will prompt an increase in administered doses as more pharmacies and health clinics -- places that traditionally attract a broader pool of people -- join the vaccination campaign.

Oil futures found a fresh round of buying after Wednesday's inventory data showed U.S. crude oil stocks declined by a larger-than-expected 994,106 million bbl and production rate flatlined below 11 million barrels per day (bpd) in the final week of January. Last month, commercial crude inventories declined each week except for one, down a cumulative 17.810 million bbl to the lowest since stock level since late March 2020 at 475.659 million bpd. The destocking pattern combined with robust demand for distillates and expectations for higher gasoline use in the springtime will likely continue to lend support to the oil complex.

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

Liubov Georges