WASHINGTON (DTN) -- Reversing midmorning losses, nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Wednesday's session higher, lifting U.S. benchmark above $69 per barrel (bbl). The reversal came as investors reassessed the outlook for U.S. inflation and employment growth for the second half of the year after a fresh batch of economic data suggested consumer prices are easing and job gains are accelerating.
The U.S. dollar index reversed lower and stocks on Wall Street rallied after the Bureau of Labor Statistics reported the consumer price index -- a key measure of inflation, eased to 0.5% in July from a 13-year high 0.9% print in the prior month. Headline categories affected by the reopening of the economy, like used cars and airline tickets, saw the largest month-on-month fall. Excluding volatile energy and food prices, the index for all items rose 0.3% last month. U.S. President Joe Biden called the CPI report "good news on inflation," adding that he expects inflation to return to normal early next year.
The Federal Reserve will likely see the fresh reading as more evidence of "substantial" progress toward their goals of price stability and maximum employment that will likely accelerate discussion about tapering the central bank's $120 billion a month in asset purchases. Atlanta Federal Reserve Bank President Raphael Bostic said earlier this week that the Fed's tapering of bond and mortgage-backed security purchases could begin as early as this October should the jobs market keep up with the torrid pace of improvement.
The U.S. economy added 943,000 jobs in July, a noticeable pickup from the average of 563,000 jobs over the previous six months. This still leaves the economy 7.6 million jobs short of pre-pandemic projections. At the same time, the unemployment rate fell to 5.4%. Next, investors will gauge through weekly unemployment claims, on tap for release at 8:30 a.m. EDT Thursday, that are expected to show a modest increase to 378,000 new applications.
Wednesday's inventory report from the U.S. Energy Information Administration was mixed to bearish, showing crude and gasoline inventories declined less than expected in the first week of August, while demand for motor transportation fuel tumbled 3.5% despite the peak season for summer travel. Gasoline supplied to the U.S. market, a measure for demand, averaged 9.430 million barrels per day (bpd) last week, bringing the four-week average to 9.5 million bpd. Earlier this week, EIA forecast that domestic gasoline consumption would average 8.8 million bpd through the end of this year, 500,000 bpd below the 2019 annual demand rate. Gasoline inventories, meanwhile, fell a less-than-expected 1.4 million bbl last week and are about 3% below the five-year average.
Nationwide crude oil inventories fell 447,968 bbl from the previous week to 438.8 million bbl, about 6% below the five-year average. Earlier in the week, analysts expected crude stockpiles would decrease by 600,000 bbl. The smaller-than-expected draw came despite refiners boosting run rates by 0.5% on the week to 91.8% of capacity -- the highest utilization rate since the holiday week ended July 9, while processing 16.197 million bbl of crude oil daily.
After triggering early selling, futures traders shrugged off news that the White House called on the Organization of Petroleum Exporting Countries and Russia-led partners to increase their production quotas when the group next meets in Baghdad on Sept. 1. In an official statement released Wednesday morning, National Security Adviser Jake Sullivan said: "While OPEC+ recently agreed to production increases, these increases will not fully offset previous production cuts that OPEC+ imposed during the pandemic until well into 2022. At a critical moment in the global recovery, this is simply not enough."
The producer group, known as OPEC+, currently withholds 5.8 million bpd from the global oil market, agreeing to boost their monthly quotas by 400,000 bpd each month through December 2022. It remains unclear whether the alliance would pivot from the current production policy.
On the session, NYMEX September West Texas Intermediate futures advanced $0.96 to $69.25 per bbl, and the international crude benchmark for October delivery settled $0.81 higher at $71.44 per bbl. NYMEX September RBOB contract rallied 3.43 cents or 1.7% to $2.3022 gallon and NYMEX September ULSD futures gained 2.56 cents to $2.1058 gallon.
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