Tame Inflation Data, Stimulus Deal Send Oil Futures Higher

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearest delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange shifted higher on Thursday in line with surging equities and retreating bond yields after midweek data showed consumer price increases in February were limited, easing investor concerns over rising inflation, and the U.S. Congress passed President Joe Biden's $1.9 trillion spending package, which extends unemployment benefits and includes generous Treasury payments to citizens that are set to accelerate an already expanding U.S. economy.

In early trading, West Texas Intermediate for April delivery jumped above $65 per barrel (bbl), gaining 70 cents from Wednesday's settlement and Brent May crude advanced 72 cents to trade near $68.65 bbl. NYMEX April ULSD futures traded little changed near $1.9214 gallon and front-month RBOB futures rallied 1.23 cents to trade near $2.0918 gallon.

The latest federal spending package, subdued inflation data and the re-opening of large U.S. states after nearly a year of restrictions on business and other social activities pushed the oil complex higher this morning, with the WTI contract once again trading above $65 bbl while Brent futures traded at a $69.05 overnight high.

The Labor Department reported Wednesday consumer prices increased 0.4% in February, matching expectations from economists and investors. The Consumer Price Index gained 1.7% on a year-over-year basis, which also was in line with estimates. Concerns over rising inflation took center stage in recent weeks as the U.S. Congress readied a massive $1.9 trillion stimulus deal which included a third round of stimulus checks to Americans and generous benefits for the millions who are unemployed. Recent jobs data, however, suggests the battered labor market is already improving, with unemployment claims falling while the hard-hit service sector resumed hiring in preparation for spring re-openings.

The market anticipates jobless claims for the week-ended March 6 to come in at 725,000 versus 745,000 in the final week of February that showed significant improvement for a second straight week. The economy, meanwhile, added 379,000 new jobs in February, according to data from the Labor Department, with most of those gains coming from leisure, hospitality, and food services. Employment within those industries should accelerate in the spring and summer months as the pandemic eases and restrictions on businesses abate.

Texas lifted all coronavirus restrictions Wednesday, including a mask mandate. The Lone Star state is now the 16th state without a mask requirement, and Wyoming becomes the 17th state next week. Alabama ends its mask rule in early April.

With stimulus checks likely to arrive in American bank accounts as early as next week and states easing restrictions on businesses, analysts expect driving demand and economic activity to pick up pace in the coming months, lifting demand for refined fuels.

Energy Information Administration inventory data released Wednesday showed the pace of gasoline consumption in the United States has accelerated, jumping to a four-month high 8.7 million barrels per day during the week ended March 5, which is still 8% below pre-COVID levels.

Gasoline stocks fell by a massive 11.87 million bbl last week, with inventories tightening in all regions, including in the high-demand PADD 1 East Coast. Gasoline stockpiles in that market declined more than 10% from the previous week to 63.7 million bbl -- the largest weekly drawdown of all regions. Distillate demand, which closely correlates with economic activity surged to the highest level since January 2019 at 4.487 million bbl.

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

Liubov Georges