DTN Oil

WASHINGTON (DTN) -- Nearest delivery oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange pushed higher in afternoon trade Wednesday as market participants balanced signs of faster economic growth against rising inflation. All 12 Federal Reserve districts reported supply bottlenecks and lack of available labor as a sign of a potential shortfall in meeting demand in the coming months.

The U.S. economy expanded at a moderate pace from early April to late May and at a somewhat faster rate than the prior period, according to the Federal Reserve's Beige Book released Wednesday afternoon. All 12 districts cited increased vaccination rates and relaxed social distancing measures were the main factors behind accelerated business activity, although supply chain bottlenecks and rising input costs have slowed that growth.

Despite shortfalls, factory output increased further in the reviewed period, propelled by strong consumer demand. This data point correlated well with an increase in the manufacturing index reported by the Institute of Supply Management Tuesday, which gained 0.5% from the previous month to 61.2%.

Staffing levels increased at a relatively steady pace with two-thirds of the Fed districts reporting modest employment growth over the reporting period and the remainder indicating employment gains were moderate.

The labor market has been slow to recover from the pandemic's recession-level job losses compared to other sectors of the economy, with April's employment report badly missing the mark with a mere 277,000 new jobs added. Friday's nonfarm payroll report from the U.S. Labor Department will provide the first indication of whether the hiring slowdown seen in April was a one-month phenomenon, as some economists suspect, or a growing challenge for policymakers. Economists call on the U.S. economy to have added 645,000 new jobs in May, with a wide range in expectations from 400,000 to 950,000.

Should new hiring improve in May, that would move the Fed closer to its mandate in supporting employment and allow the central bank to consider scaling back its $120 billion in monthly purchases of Treasury and mortgage-backed bonds.

On Thursday, investors will glean intelligence from ADP's private payroll report due out 8:15 a.m. EDT, closely followed by the Labor Department's weekly unemployment claims data set for publication at 8:30 a.m. EDT.

Separately, oil traders await the release of weekly inventory data from the American Petroleum Institute, delayed a day due to Monday's Memorial Day holiday. U.S. commercial crude oil stocks are expected to have fallen by 2.3 million barrels (bbl) in the week ended May 28, with all forecasters unanimously calling for a drawdown. Gasoline stockpiles are expected to have decreased by 1.7 million bbl from the previous week, with estimates ranging from a decrease of 4.9 million bbl to an increase of 1.5 million bbl. Stocks of distillates are expected to have fallen by 1.1 million bbl from the previous week. Refinery use likely rose by 0.7% to 87.7% of capacity.

On the session, July West Texas Intermediate futures surged $1.11 to settle at $68.83 bbl after trading at $69 bbl, and ICE August Brent crude futures rallied $1.10 for a $71.35 bbl settlement. July ULSD futures advanced 3.56 cents to $2.1071 gallon, with July RBOB futures moving up 2.37 cents to $2.1941 gallon.

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