Oil Futures Ease After Three-Day Rally Ahead of Fed Summit

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Following a three-session rally, oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange pulled back early Thursday, sending the U.S. crude benchmark 1% lower as traders positioned ahead of incoming data on domestic inflation and jobless claims for additional clues on the economy's performance under a Delta-driven avalanche of coronavirus infections, and signals for potential tapering of the Federal Reserve's bond and mortgage-backed securities purchases as policymakers gather for their annual summit in Jackson Hole, Wyoming.

Storm activity is limiting losses for the oil complex Thursday morning, as Tropical Wave Invest 99L "continues to become better organized," said DTN Weather, tracking towards U.S. Gulf of Mexico. Meteorologists at DTN Weather forecast the system will develop into a tropical depression or storm later Thursday or Friday, while moving into the Gulf this weekend, seen reaching hurricane strength Sunday evening, early Monday. The expected path of the storm has moved east away from Houston, with landfall now seen along the Louisiana-Mississippi border Tuesday morning.

Last year, a total of six Atlantic Basin storms shut-in over 41 million barrels (bbl) in offshore Gulf of Mexico crude oil production. The level of activity for the 2021 Atlantic hurricane season is once again forecast to rank well above normal. DTN Weather forecast 21 storms of which nine storms are hurricanes including four major hurricanes. We are quickly approaching peak hurricane activity.

In outside markets, U.S. equity futures were mixed Thursday and the dollar index gapped higher, as investors prepare for a key reading on U.S. inflation and jobless claims ahead of the Federal Reserve economic summit in Jackson Hole. Global stocks retreated from Wednesday's record high after Bank of Korea introduced its first rate hike in three years, pulling back fiscal support for the economy despite heightened risks tied to the Delta coronavirus variant. BOK's decision could cast a different light on Friday's speech from Fed Chairman Jerome Powell, although market consensus appears to have tilted towards a more dovish speech from the Fed chair.

Investors also await the second estimate of second quarter U.S. Gross Domestic Product, which is expected 0.1% above the first reading for 6.6% growth, weekly jobless claims and the Fed's preferred measure of inflation, the Personal Consumption and Expenditures price index.

Following the Food and Drug Administration's decision to grant Pfizer's coronavirus vaccine full approval on Monday, Goldman Sachs upped its vaccination policy to require proof of vaccination from all staff and clients entering its offices as of Sept. 7. Any employee who is not fully vaccinated will be expected to work from home. The company will also require masks to be worn in its buildings' common areas, regardless of vaccination status. Goldman Sachs is the latest bank to require employees be vaccinated before returning to offices following similar edicts from Morgan Stanley and Citigroup, while Chevron is also mandating the vaccine.

Centers for Disease Control and Prevention show 73.2% of Americans received at least one dose of the coronavirus vaccine.

In early trading, NYMEX October West Texas Intermediate futures fell $0.56 to $67.79 bbl, and Brent crude for October delivery declined $0.52 to below $72 bbl. NYMEX September ULSD dropped more than 1 cent to $2.1072 gallon and September RBOB futures declined 1.22 cents to $2.2886 gallon.

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

Liubov Georges