DTN Oil

WASHINGTON (DTN) -- In the longest winning streak since October 2022, oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled higher for a seventh consecutive session on Friday after U.S. economic data showed easing inflation and a strong labor market supported consumer spending.

Americans feel more optimistic about their personal finances than at any point over the past eight months, with year-ahead inflation expectations falling for the fourth straight month, according to the University of Michigan's consumer sentiment survey. The consumer sentiment index recovered 8.2% in the past two weeks to 64.6 -- the highest reading since April 2022. The gain in consumer sentiment is directly linked to retreating inflation, which fell to a negative monthly reading for the first time in 3 1/2 years, down 0.1% in December.

Also this week, the U.S. Labor Department reported new claims for jobless benefits fell again in the week through Jan. 7 to 205,000, suggesting that layoffs across some industries have yet to spread to the broader economy.

Following the latest economic readings this week, several Federal Reserve officials voiced their support in favor of smaller increases in the federal funds rate this year to let the economy absorb the lags in their monetary tightening actions in 2022.

"The days of us raising federal funds rates by 75 basis points at a time have surely passed ... hikes of 25 bps will be appropriate going forward," said President of Philadelphia Federal Reserve Bank Patrick Harker in reaction to the latest inflation data.

Investors priced in a nearly 100% likelihood for the Federal Open Market Committee to slow increases in the federal funds rate to 0.25% during the February meeting from 0.5% in December and 0.75% seen during FOMC meetings from July through November last year. A 0.25% hike by FOMC on Feb. 1 would lift the target range in the federal funds rate to 4.5% to 4.75%. Central bank officials have pledged to raise the rate above 5% this year and leave it there at least through 2023.

Earlier in the session, oil futures got a leg up from data showing China increased its import quotas for independent refiners this year to a total of 132 million tons, which compares with 109 million tons seen over 2022. For most independent refiners, as much as 70% of their annual allowances have now been issued, according to traders.

China sets a quota system under which independent refiners are given a certain volume to import oil in several allowances each year. It must be noted, however, that China still has the largest spare refining capacity globally and until China imports more oil than it exports products, it would be challenging to assess how impactful China's reopening is for the global oil market.

A survey from China-focused consultants published Friday morning by Bloomberg shows daily oil demand in China could increase by 800,000 barrels per day (bpd) this year after contracting sharply in 2022, taking daily consumption to an all-time high of about 16 million bpd. In 2022, China's consumption averaged only slightly above 15 million bpd, according to estimates from the U.S. Energy Information Administration. Demand recovery is mostly expected to take shape in the second quarter, with traffic and the number of flights gradually rebounding from their 2022 lows. Wood Mackenzie expects that surge in international flights in and out of China could boost daily consumption to above 900,000 bpd.

At settlement, West Texas Intermediate for February delivery rallied $1.46 to $79.86 per barrel (bbl), and Brent March futures on ICE advanced $1.25 to $85.28 per bbl. NYMEX RBOB February contract gained $0.0575 to $2.5328 per gallon, and front-month ULSD futures advanced $0.0369 to $3.2559 per gallon.

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