Oil Futures Gain as USD Slides to 6-Week Low, Yields Retreat

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Reversing overnight losses, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled the first trading day of the week mostly higher, supported by a rapidly declining U.S. dollar and retreating yields on 10-year Treasury notes amid diminished concerns that the Federal Reserve would boost interest rates sooner than expected to limit heavy government spending-induced inflation.

On the session, NYMEX West Texas Intermediate for May delivery added 25 cents to $63.38 barrel (bbl) and the next-month June contact narrowed its premium against the expiring contract to settle near parity. WTI May futures expire Tuesday afternoon. International benchmark Brent for June delivery gained 28 cents to settle just above $67 bbl. NYMEX May ULSD futures eased 0.32 cent to $1.8925 gallon and May RBOB futures advanced 0.46 cent to $2.0445 gallon.

Monday's mostly higher session came on the back of a softer greenback, which declined to a fresh six-week low 91.025, extending the recent downtrend into a new trading week. Renewed weakness in the U.S. Dollar Index came despite indications of a strong business upturn in the world's largest economy, with weekly unemployment claims falling sharply and consumer spending reaching a 10-month high in March. Later this week, investors will get a closer look at inflation and business dynamics at the regional level, with the release of monthly surveys by the federal Reserve Banks of Chicago and Kansas City. On Friday, the U.S. Purchasing Manager's Index for April is expected to show a modest improvement to 59.5, up 0.5% from the prior month.

The Organization for Economic Cooperation and Development forecasts the U.S. economy will be larger by the end of 2022 than it would have been if the pandemic had not happened. According to these estimates, American households saved an "excess" of $3 trillion in the first nine months of 2020 aided by generous government payouts.

Further spurring sentiment, China released a set of bullish economic data over the weekend showing record growth in its first quarter gross domestic product at an 18.3% annualized rate and a 34.2% year-on-year surge in retail sales. The accelerated growth, however, comes off a sharp contraction in the first quarter 2020, when the economic output fell sharply during the height of the COVID-19 outbreak in China. China's economic data continue to point to a strong rebound in the world's second largest economy, which is likely to power the region's broader post-pandemic recovery.

Capping gains for the oil complex, India, Brazil, and parts of the European Union face a sharp resurgence in new COVID--19 cases as vaccine rollout lags behind the viral spread. The Indian capital of New Delhi will enact a strict lockdown for six days starting today, according to city officials, adding the healthcare system has reached a breaking point.

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

Liubov Georges