RBOB Futures Fall From Nearly 3-Year High on Demand Concerns

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange accelerated loses in afternoon trade Thursday. The front-month RBOB contact fell from a nearly three-year high amid concerns that summer driving demand might not be as strong as some expect after government data showed gasoline stockpiles unexpectedly increased during the final week of April despite ongoing reopenings of large U.S. states.

On the session, NYMEX June West Texas Intermediate contract fell 92 cents or 1.5% to $64.71 barrel (bbl) and ICE July Brent futures shed 88 cents to settle a tad above $68 bbl. NYMEX June RBOB slumped 3.76 cents or 1.8% to $2.1137 gallon after trading Wednesday at $2.1824 gallon -- the highest level on the spot continuation chart since July 2018. NYMEX June ULSD futures fell back from a 16-month spot high $2.0278 gallon to settle at $1.9895 gallon.

Thursday's softer session came despite weekly unemployment claims that showed a marked improvement in the final days of April, with initial filings falling below 500,000 for the first time since March 2020. Unemployment claims have been trending decidedly lower in recent weeks as businesses across the country rush to rehire workers to meet surging demand. Recent surveys on business activity from Institute of Supply Management showed operators in manufacturing and service sectors alike struggle to find available labor. Media airways were hit with the reports this week some businesses operators increasingly look to permanently replace labor with robots amid acute shortages.

New jobless claims came a day ahead of Friday's employment report from the Labor Department, with consensus calling for nonfarm payrolls to have risen in April by 995,000, but estimates stretch as high as 2.1 million. The unemployment rate likely fell to a pandemic low of 5.8% from 6.0% but would remain well above the pre-crisis level of 3.5%. Should employment data disappoint with a reading below 900,000, that would be seen extremely bearish for the labor market attempting to shake off pandemic scars.

U.S. gasoline demand does not seem to reflect improvement in the labor market, with the recent data from U.S. Energy Information Administration showing stockpiles jumped 740,000 bbl while fuel demand eased from the previous week. Gasoline supplied to the U.S. market, a measure for demand, softened to a six-week low 8.86 million barrels per day (bpd) despite reopenings of large gasoline consuming states. Implied demand for distillates was down nearly 5% at 4.13 million bpd, even as inventories declined 2.9 million bbl to a one-year low of 136.15 million bbl.

In outside markets, the Dow Jones Industrial Average reset record highs to close the session at 34,349 and the U.S. Dollar Index slumped against a basket of foreign currencies following the decision from the Bank of England to taper the pace of their bond-buying campaign beginning next month. U.K. central bank also said the economy is on track for a stronger economic recovery than it previously expected, underpinned by the country's comparatively quick COVID-19 vaccination campaign. The BOE upgraded its 2021 growth outlook for the world's fifth-largest economy to 7.25%, slightly above analyst expectations and up from 5% as forecast in February.

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

Liubov Georges