Oil, Equities Gain on Infrastructure Deal, Macroeconomics

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 moved higher in afternoon trade Thursday, with the RBOB contract stretching gains by posting its highest settlement on the spot continuous chart since May 2018. Equities surged after U.S. President Joe Biden announced a tentative bipartisan agreement on a $559 billion infrastructure plan, seen boosting employment, demand for commodities and refined fuels.

"We have a deal!" said Biden in a surprise appearance outside the White House after endorsing a bipartisan infrastructure package secured by a group of 10 senators.

Under the framework, the bipartisan package -- led by Senators Kyrsten Sinema, D-Ariz., and Rob Portman, R-Ohio -- would include $312 billion in new spending on roads, bridges, and other traditional infrastructure projects and $266 billion to other infrastructure, including water and broadband.

Portman called it "a good compromise that's going to help the American people."

"I'm pleased to see we were able to come together on a core infrastructure package," he said, adding that it will be done "without new taxes." Proposed financing sources for the new investment include the sale of oil from the Strategic Petroleum Reserve, reinstating superfund fees for chemicals, repurposing unused relief funds from 2020 emergency relief legislation and redirecting unused employment insurance relief funds.

It remains unclear, however, whether Senate Majority Leader Chuck Schumer and Senate Minority Leader Mitch McConnell will endorse the deal, with House Speaker Nancy Pelosi making it clear that the House will not take up the bipartisan infrastructure bill until the Senate passes a larger, more sweeping infrastructure package through budget reconciliation. Biden added he would not sign a bipartisan infrastructure package without a reconciliation bill, saying he is committed to a dual track system to get both bills passed.

Against the backdrop of infrastructure spending, demand for lumber, steel and distillate fuels are likely to get a boost along with prices for the underlying commodities that already booked phenomenal gains in the first half of the year. The infrastructure plan includes repairs to roads and bridges, investments in airports and transit systems over an eight-year period.

Thursday's higher settlements also follow a string of supportive economic data showing first-time unemployment claims in the United States fell modestly last week and durable goods orders climbed at the fastest pace since January. U.S. durable goods orders advanced 2.3% last month, led by an increase in new orders for transportation equipment, up 7.6% from April's revised levels, according to data published this morning from the U.S. Census Bureau. A private survey showed U.S. factory activity climbed to a record high in June even as operators still struggle to secure raw material and qualified labor, prompting substantial price increases for both businesses and consumers. U.S. Flash manufacturing Purchasing Managers Index for June gained to 62.6 from last month's 61.5, indicating continued expansion for the domestic industry.

Lending additional support to the oil complex, Wednesday's inventory report released by the Energy Information Administration showed nationwide crude oil stockpiles declined by a larger-than-expected 70.6 million barrels (bbl) last week to the lowest level since March 2020 at 459.1 million bbl. Gasoline stockpiles at 240.05 million bbl fell below the five-year average for the first time since the beginning of the coronavirus pandemic amid strengthening demand for the transportation fuel.

On the session, NYMEX July RBOB futures advanced 1.40 cents to settle at $2.2809 gallon and front-month ULSD futures notched a modest 0.29 cent gain for a $2.1623 gallon settlement. NYMEX August WTI settled up $0.22 at $73.30 bbl and the international crude benchmark Brent contract for August delivery advanced $0.37 to settle at $75.56 bbl.

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

Liubov Georges