DTN Oil

WASHINGTON (DTN) -- Erasing midmorning gains, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Tuesday's session mixed as traders turned their focus to weakness in U.S. and global oil demand, with new macroeconomic data showing the domestic labor market has started to loosen under pressure from the Fed's aggressive interest rate hikes and high inflation.

U.S. job openings fell below 10 million in February for the first time in nearly two years, according to the Job Openings and Labor Turnover Survey released Tuesday morning by the Labor Department. Further details of the survey show available positions totaled 9.93 million, a drop of 632,000 from January's downwardly revised number. Although the survey has been widely criticized over its methodology and data accuracy, it could still offer some clues on the overall direction in the labor market. For instance, prior to the February data, job openings outnumbered available workers by nearly 2 to 1. The latest figures bring that ratio down to less than 1.7 to 1.

As the economy slows, it is safe to assume that businesses will cut job openings and employees will be less inclined to quit in search of better positions or higher pay. This should cool down the inflationary pressures that the Federal Reserve has been targeting for over a year now. Next, investors will turn their focus to the Non-Farm Employment Report for March scheduled for 8:30 a.m. EDT release Friday. Investors anticipate the economy added 240,000 new jobs last month, down from February's 311,000, but still well above the pre-pandemic average level.

Also on Tuesday, oil traders positioned ahead of U.S. weekly oil inventory data from the American Petroleum Institute scheduled for 4:30 p.m. EDT release, followed by official data from the U.S. Energy Information Administration on Wednesday. U.S. oil inventories are projected to have decreased by 1.5 million barrels (bbl) for the week ended March 31, according to surveyed analysts and traders. Gasoline stockpiles are expected to decline 1.2 million bbl, while distillates supplies are seen falling by 500,000 bbl from the previous week.

Refinery use likely increased by 0.3% from the previous week to 90.6%.

At settlement, West Texas Intermediate futures for May delivery added $0.29 per bbl to $80.71 per bbl, and international benchmark Brent settled the session little changed at $84.94 per bbl. NYMEX May RBOB futures declined $0.0204 to $2.7371 per gallon, while May ULSD futures settled at $2.6667 per gallon, up marginally for the session.

Gains in the crude complex outpaced those for the refined products primarily on the back of 1.66-million-barrel-per-day (bpd) production cuts announced by the Saudi-led Organization of the Petroleum Exporting Countries and allied partners. The output cut adds to a reduction of 2 million bpd agreed by the group in October. Taken together, the output cuts account for about 3% of the global oil production taken off the market in just seven months. In a note released this morning, Fitch Ratings said the cuts should support prices in the short term, leading to an increased likelihood that the market could switch into a deficit in 2H '23, particularly due to recovering consumption in China.

"We believe that the market was in a moderate surplus in 1Q '23 with OECD commercial inventories increasing by 32 million tons in January and a further 10 million tons in February. The decision on production cuts increases the likelihood of the market switching into deficit this year as demand will increase by 2MM bpd in 2023, mostly because of China reopening, which will account for about half of demand growth," said Fitch Ratings.

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

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