DTN Oil

WASHINGTON (DTN) -- Bolstered by risk-on sentiment in broader markets, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange powered higher Thursday morning as traders look towards the release of key economic data in the United States, including first quarter gross domestic product and weekly unemployment claims, for further evidence that the economy is strengthening amid deeper public spending from the federal government.

Domestic economy is seen to have grown at an annualized rate of 6.5% from January to March, powered by President Joe Biden's massive $1.9 trillion spending package, Fed monetary easing policy, and expanded access to COVID-19 vaccines. Paired with business reopenings, these factors could have contributed to even faster growth of 9.5% to 10% in the reviewed period, according to some economists. Federal Reserve Bank of Atlanta estimates first quarter GDP growth expanded at 7.9%, down from 8.2% on April 26.

Despite clear signs of accelerated growth, the Federal Open Market Committee left its benchmark interest rate unchanged between 0.25% and 0% in its April decision, and stressed that any pickup in inflation is transitory even though acknowledging some improvement.

"Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement," the Fed said in its post-decision statement Wednesday afternoon.

U.S. weekly unemployment claims are projected to have remained unchanged from the previous week's reading with another 547,000 filed applications, although consensus ranges from 525,000 to 617,000 first-time filings.

Reducing the pace of buying bonds from the current $120 billion per month was not even on the FOMC agenda -- and that means further pressure on the U.S. dollar valuation. Greenback fell back to a two-month low 90.395 in overnight trade against a basket of foreign currencies, while boosting the front-month West Texas Intermediate contract.

In early trade, NYMEX June West Texas Intermediate futures advanced $0.85 to $64.72 per barrel (bbl), and ICE June Brent futures gained $0.90 to trade just above $68 bbl. Next-month delivery July ICE Brent futures expanded its discount to $0.52 against the expiring contact. NYMEX May ULSD futures rallied 2.36 cents to $1.9622 gallon, with next-month delivery contact trading near parity. NYMEX May RBOB futures extended 1.58 cents higher to $2.0880 gallon with the June contract trading with a 0.21 cents premium.

Oil complex gains accelerated Wednesday after the latest Energy Information Administration data showed U.S. distillates stocks decreased by 3.3 million bbl during the week ending April 23, while gasoline and crude stockpiles remained little changed from the previous week. Refiners, meanwhile, raised runs to 85.4% last week -- the highest utilization rate since mid-March 2020.

Another distillate draw and stronger run rates appeared to confirm a view that demand recovery in the United States, Europe and other developed economies could offset uncertain demand outlook in Asia, with India and Japan, the world's third and fourth largest oil consumers, struggled to control the COVID-19 spread.

Thursday's morning price move was also underpinned by optimism after Biden proposed a $1.8 trillion spending plan on education, childcare and infrastructure over the next 10 years. The president said taxes for the richest 1% of Americans would be raised to help pay for his plan.

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