WASHINGTON (DTN) -- Following an explosive data-driven rally on Wednesday, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange moved lower in overnight trade, weighed down by a strengthening U.S. dollar index and sagging equity futures as investors turned cautious ahead of the release of key economic data in the United States that could give additional clues on how the Delta-driven surge in coronavirus infections has affected economy's recovery.
In early morning trading, the NYMEX October West Texas Intermediate contract slipped $0.23 to trade near $72.38 per barrel (bbl) after adding more than $2 on Wednesday, and Brent crude for November delivery declined to $75.26 bbl. NYMEX October RBOB futures traded little changed near $2.2057 gallon, and front-month ULSD futures slipped 0.64 cents from a $2.2053 a gallon settlement on Wednesday.
The U.S. Dollar Index jumped 0.18% against the basket of foreign currencies to trade above 92.7-level, with investors awaiting the release of weekly unemployment claims and U.S. retail sales for August that could help define a direction for markets.
Following July's contraction of 1.1%, investors expect retail sales to decline by 0.8% in August, with rising prices joined with the delta-driven surge in coronavirus infections likely to dampen consumer spending in the final weeks of summer.
Markets will likely put a lot of emphasis on last month's retail sales ahead of next week's highly anticipated Federal Reserve Open Market Committee meeting, scheduled for Sept. 21-22. Combined with deteriorating consumer sentiment and lower-than-expected August jobs report, which showed an increase of 235,000 in nonfarm payrolls, disappointing retail sales data could force the Fed's hand to delay tapering of asset purchases. The Federal Reserve currently buys $120 billion a month in bond and mortgage-backed securities.
Tuesday's inflation data revealed that the Core Consumer Price Index in August edged lower to 4% on a yearly basis from 4.3% in July, supporting the view that the Fed could afford to remain cautious with regards to tapering.
Last week's unemployment claims are expected to tick higher but remain near the pandemic low of 310,000, with analysts pointing to a likely increase in new fillings from Hurricane-hit Louisiana and Texas this month. Wednesday's industrial data from the US Federal Reserve showed Hurricane related shutdowns in Louisiana shaved off at least 0.3% from the total industrial output last month. "Although the hurricane forced plant closures for petrochemicals, plastic resins, and petroleum refining, overall manufacturing output still rose 0.2% and was 1% above the pre-pandemic level," the Fed said.
Limiting the downside for the oil complex, Wednesday's inventory report from the U.S. Energy Information Administration showed commercial crude-oil supplies fell by a massive 6.4 million bbl last week compared with calls for a smaller 2.5 million bbl drop. At 417.4 million bbl, domestic crude supplies now stand about 7% below the five-year average. The larger-than-expected crude draw came as refinery ran rates nationwide increased just 0.2% on the week and domestic production gained a modest 100,000 barrels per day (bpd) after plunging 1.2 million bpd in the prior week. Gasoline stockpiles fell a less-than-expected 1.9 million bbl with demand for the motor transportation fuel tumbling 7.5% to 8.892 million bpd. Demand for distillate fuels, often seen as a proxy for economic activity, edged higher by 110,000 bpd from the previous week to 3.795 million bpd. Distillate stockpiles declined by 1.7 million bbl to about 13% below the five-year average at 131.9 million bbl.
Total inventories of crude and petroleum products declined by 10 million bbl from the previous week, EIA reported.
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