DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange extended higher in early morning trade Thursday following bullish inventory data from the U.S. Energy Information Administration showing a steep decline in domestic crude and gasoline inventories along with a surge in U.S. oil exports for the second week of August that have signaled robust demand for U.S. barrels despite signs of a global economic slowdown.

U.S crude oil exports hit 5 million barrels per day (bpd) during the week ended Aug. 12, the highest on record, according to the data released on Wednesday from EIA, with West Texas Intermediate trading at a steep discount to international benchmark Brent making purchases of U.S. crude more attractive to foreign buyers. Redirection of Russian crude flows from the European market could be one of the reasons behind the surge in crude oil exports from the U.S. Gulf Coast. Strong pace of crude exports along with a surprise drop in U.S. oil production sent commercial crude oil stocks tumbling by 7.1 million barrels (bbl) during the week ending Aug. 12, compared with expectations for inventories to rise by 100,000 bbl. Wednesday's inventory data was also supportive for the gasoline complex, showing demand for motor fuel climbed to the second highest rate this year at 9.348 million bpd, up 225,000 bpd or 2.4% from the previous week. On a four-week average basis, gasoline consumption was still some 4.2% below last year's four-week average of 9.466 million bpd. The recent demand figures might suggest falling prices at the gas pump, down for a ninth straight week through Aug. 12, incentivized Americans to take late-summer road trips.

Other economic indicators released this week also point to steady consumer demand for purchases at stores, online and restaurants, with core retail sales, which excludes cars and gasoline, rising 0.7% in July, matching the June increase, the Commerce Department said Wednesday. The incoming data suggests Americans are maintaining their spending habits despite the highest inflation in nearly four decades.

In financial markets, investors are parsing through the latest minutes of the Federal Open Market Committee's July 26-27 meeting released Wednesday afternoon that showed the central bank sees risks in both raising interest rates too high and not high enough.

"Participants continued to anticipate that ongoing increases in the target range for the federal funds rate would be appropriate to achieve the committee's objectives," the minutes stated. "With inflation remaining well above the committee's objective, participants judged that moving to a restrictive stance of policy was required to meet the committee's legislative mandate to promote maximum employment and price stability."

At the same time, the central bank indicated it could soon slow the speed of monetary tightening, while also acknowledging the vulnerable state of the economy and risk to the downside for economic growth.

"Participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation," the minutes said.

Following the minutes release, CME FedWatch Tool showed the probability for a 50-basis-point rate hike in September increased to almost 60% compared with 38.5% for a larger 75-basis-point hike.

Near 7:30 a.m. EDT, NYMEX September WTI advanced $1.25 to $89.37 bbl, while ICE October Brent futures gained $1.61 to $95.28 bbl. NYMEX September RBOB rallied 4.38 cents to $2.9783 gallon, while the NYMEX September ULSD contract declined 2.36 cents to $3.5967 gallon.

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