DTN Oil

WASHINGTON, D.C. (DTN) -- After eight consecutive sessions of gains, oil futures traded on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Wednesday's session lower after weaker-than-expected economic data in the U.S. fueled recession fears, souring sentiment in broader markets.

U.S. retail sales declined in December at the sharpest pace of 2022, marking a dismal end to the holiday shopping season as rising interest rates joined with still-high inflation dragged on consumer spending. Sales at stores and restaurants unseasonably declined by 1.1% from the prior month, the Commerce Department said Wednesday. Sales were also revised lower in November and have now fallen in three of the past four months. The decline in retail sales clearly shows the U.S. economy slowed late last year as American consumers pulled back on spending.

Further signs of slowdown could be found in industrial production data for December that showed output declined more than expected, indicating manufacturing activity is rapidly losing momentum as inflation pressure and higher interest rates cut demand for goods.

Manufacturing output dropped 1.3% last month, the Federal Reserve said on Wednesday. Data for November was also revised lower to show production at factories decreased 1.1% instead of the previously reported 0.6%.

Earlier in the session, the oil complex got a leg up from upbeat demand projections by the International Energy Agency that forecasts global oil demand this year would reach a record high 101.7 million bpd helped by the reopening of China's economy. Paris-based energy watchdog lifted its 2023 estimates for worldwide oil consumption by 200,000 bpd to 1.9 million bpd. In the final months of 2022, weak industrial activity in OECD countries coupled with zero-COVID policies in China sliced off nearly 1 million bpd in global demand growth.

Also on Wednesday, oil traders positioned ahead of the release of U.S. inventory data delayed one day due to the observance of the Martin Luther King Jr. holiday on Monday (1/16). Analysts expect U.S. commercial crude oil inventories to decrease by 1.1 million bbl, with estimates ranging from a decrease of 4 million bbl to an increase of 4.5 million bbl.

The decrease would be partly due to the U.S. government not transferring any crude last week from the nation's Strategic Petroleum Reserve to the commercial side.

Gasoline stockpiles are expected to have increased 1.7 million bbl from the previous week, with estimates ranging from a decline of 2 million bbl to an increase of 4.6 million bbl.

Stocks of distillates, which is mostly diesel fuel, are expected to fall by 400,000 bbl.

Refinery use likely increased by 3% from the previous week to 87.1% as refiners continued to claw back toward normal activity levels following cold weather-forced shutdowns in late December.

At settlement, WTI for February delivery declined $0.70 to $79.48 bbl after climbing above $82 bbl in intrasession high, and Brent March futures on ICE fell $0.94 to $84.98 bbl. NYMEX RBOB February contract dropped $0.0216 to $2.5235 gallon, and front-month ULSD futures added $0.0120 for a $3.2630 gallon settlement.

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