DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange slipped in early trade Thursday after the American Petroleum Institute reported U.S. crude and gasoline inventories unexpectedly increased during the week ended June 17, easing some concern over tight domestic supplies, while an overnight rally in the U.S. Dollar Index spurred by weaker-than-expected manufacturing data in the Eurozone further pressured West Texas Intermediate.

API data released late Wednesday afternoon showed commercial crude oil stocks increased by a sizable 5.607 million barrels (bbl) last week, missing calls for a 1.2 million bbl draw. If realized by official government data, this would be the third consecutive weekly build in domestic crude oil inventories. Stocks at the Cushing, Oklahoma, hub -- the NYMEX delivery point for the West Texas Intermediate futures contract -- declined 390,000 bbl. Gasoline inventory, meanwhile, posted a build of 1.216 million bbl compared with calls for a draw of 800,000 bbl. Distillate inventories fell 1.656 million bbl, missing an expected 300,000 bbl week-on-week increase.

It's unclear when market followers will get a glimpse at official government data after the Energy Information Administration late Wednesday said they are working through technical issues and were not sure when those issues would be remedied to allow for the publication of U.S. petroleum statistics.

On the macroeconomic front, Eurozone's manufacturing activity fell by a larger-than-expected margin in early June, falling to a 22-month low 52 compared with 54 reading in the previous month. Manufacturing output contracted for the first time in two years and service sector growth cooled considerably, easing most notably for consumer-facing services, according to private data released overnight. Remarkedly, June's slowdown was the most abrupt recorded by the survey since the height of the global financial crisis in November 2008. Companies also scaled back their business expectations for output over the coming year to the lowest since October 2020.

Both the stagnation of demand and worsening outlook were widely blamed for the rising cost of living, tighter financial conditions and concerns over energy and supply chains that are linked to the war in Ukraine and ongoing pandemic disruptions.

"Eurozone economic growth is showing signs of faltering as the tailwind of pent-up demand from the pandemic is already fading, having been offset by the cost-of-living shock and slumping business and consumer confidence," commented Chris Williamson, chief business economist with S&P Global Market Intelligence, on the flash PMI data.

In the United States, investors will continue to monitor comments from Federal Reserve Chairman Jerome Powell who will testify before U.S. lawmakers for a second day Thursday. Powell reassured markets on Wednesday that the U.S. central bank is committed to crushing the hottest inflation in 40 years, promising to raise interest rates until there is "compelling evidence" that prices are falling.

"At the Fed, we understand the hardship high inflation is causing. We are strongly committed to bringing inflation back down, and we are moving expeditiously to do so," said Powell in prepared remarks. "We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses."

Powell noted the risk of recession as it tightens monetary policy while indicating the central bank is not trying to "provoke a recession."

His testimony comes just one week after the Fed voted to raise interest rates by 75 basis points, the largest single rate hike since 1994, underscoring just how serious policymakers are about tackling the inflation crisis after a string of alarming economic reports. The move puts the key benchmark federal funds rate between 1.5% and 1.75%, the highest since the pandemic began two years ago.

Near 7 a.m. EDT, U.S. equity futures edged modestly higher with the Dow Jones Industrial Average indicating a 122-point opening bell bump while those linked to the S&P 500, which is down 21.1% for the year, its worst first half performance since 1962, are priced for a 10-point gain. Futures linked to the tech-focused Nasdaq are looking at a 75-point opening bell advance. The U.S. dollar climbed 0.26% against a basket of foreign currencies to trade near 104.250, while weighing on front-month WTI futures that traded $0.46 lower to $105.74 bbl. The international crude benchmark Brent contract for August delivery slipped $0.28 to $111.43 bbl. NYMEX RBOB July contract retreated 1.74 cents to $3.8167 gallon and NYMEX July ULSD futures fell to $4.3802 gallon, down more than 2 cents.

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