WASHINGTON (DTN) -- Fading from intra-session highs, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Friday's session little changed as mixed economic data in the United States pointed to accelerated inflation amid surging consumer spending. Renewed strength in the U.S. Dollar Index and risk-off sentiment across equity markets triggered additional pressure on the oil complex.
U.S. retail sales -- a measure of purchases at stores, restaurants and online -- gained 0.6% in June, beating market expectations for a modest decrease compared to the previous month, the U.S. Census Bureau reported Friday morning. Last month's surge in consumer spending would have been stronger if it excluded auto sales, which fell 2% from the previous month amid ongoing shortages of the key materials. High retail spending coincides with a faster-than-expected increase in consumer prices, which jumped 5.4% in June from a year earlier following a 5% increase in the prior month.
There are growing signs that faster inflation has begun to take a toll on consumer sentiment in July, with University of Michigan's gauge on year-ahead inflation expectations rising to the highest since 2008. Preliminary reading on consumer sentiment, meanwhile, dropped to the lowest since February at 80.8, compared with expectations for a monthly gain to 87.6.
"Inflation has put added pressure on living standards, especially on lower- and middle-income households, and caused postponement of large discretionary purchases, especially among upper income households," Richard Curtin, director of the survey, said in a statement.
U.S. Federal Reserve Chairman Jerome Powell said during his testimony to the Senate Banking Committee on Thursday that inflation has risen to uncomfortably high levels but maintained that rising costs are transitory and tied to the economy's reopening. U.S. Treasury Secretary Janet Yellen warned of several more months of rapid inflation before price pressures finally ease.
U.S. equities declined and the dollar index gained modestly against the basket of foreign currencies, pressuring the front-month West Texas Intermediate futures into market-on-close trade. On the session, the NYMEX August WTI contract settled at $71.81 barrel (bbl), up 16 cents from the Thursday's close, and the international crude benchmark Brent for September delivery added 0.12 cents for a $73.59 bbl settlement. Both crude benchmarks declined more than 2.5% on week. NYMEX August ULSD futures settled little changed at $2.1133 gallon, and the front-month NYMEX RBOB contact gained 0.33 cents to $2.2536 gallon.
Next week, oil traders will likely shift their focus to a potential meeting among OPEC+ members after reports this week suggested Saudi Arabia reached a compromise with the United Arab Emirates to lift production curbs beginning next month. OPEC+ members reportedly agreed in principle to raise output by 2 million barrels per day (bpd) between August and December, though a final decision was blocked by disputes over production levels after April 2022. Should reports be confirmed by OPEC+ officials in the coming days, the deal could open the door for other members of the alliance to raise their production quotas, undermining compliance with the joint agreement. On the other hand, the deal removes uncertainty around future OPEC+ supplies and reduces the chance of an all-out price war among the members of the cartel and Russia-led partners.
Liubov Georges can be reached at firstname.lastname@example.org