DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange flipped between modest gains and losses in low-volume trading Thursday. Investors are waiting for the release of a key employment report in the United States for additional clues on the economy's performance at the end of the first quarter.

The Labor Department's employment report scheduled for release Friday morning is expected to show job creation slowed further in March, adding to a slew of data pointing to a cooling economy. Markets expect U.S. employers added a median of 244,000 jobs last month, down from the 311,000 jobs created in February and January's breakneck pace of 517,000. If realized, this would be the smallest growth in employment since April 2021.

The national unemployment rate, meanwhile, is expected to remain unchanged at 3.6% after it ticked up from a 54-year low of 3.4%.

Friday's employment report comes after the Labor Department on Thursday made sizable revisions to jobless claims data, indicating Americans filed an additional 142,000 first-time unemployment claims over the past three weeks, up 24% from the previously reported level. With those revisions, actual unemployment claims for the month of March averaged 238,000.

Amid signs of a slowing economy, a rising trend in unemployment claims has been the missing dynamic. The recent trend in layoffs suggests job losses that have started in some pockets of the economy are broadening.

Investors will also pay close attention to hourly wage growth that is expected to have ticked higher in March by 0.1% from February's 0.3% gain. A higher-than-expected figure could indicate the Federal Reserve may need to continue raising interest rates to fight inflation, while anything lower could exacerbate worries about an impending recession.

Friday's employment report follows a slew of weaker-than-expected macroeconomic data this week that showed the economy is clearly slowing at a faster rate than previously thought. Two of the key indexes that measure business activity in manufacturing and service sectors of the economy surprised to the downside in March, with the index on manufacturing output falling into outright recession. The manufacturing PMI index released by the Institute for Supply Management eroded last month to the lowest level since May 2020 when the economy was hit by the COVID lockdown.

The service sector took the longest to recover from the pandemic and still enjoys pent-up demand after consumers shifted their spending from goods to leisure and hospitality. But even there the growth rate has slowed sharply, with the headline ISM index falling to a three-month low 51.2% in March, a full 3% below the February level.

"There has been a pullback in the rate of growth for the services, attributed mainly to a cooling off in the new orders, employment environment that varies by industry and continued improvements in capacity and logistics," commented Anthony Nieves, chair of the ISM Business Survey Committee.

Against this backdrop, the bullish inventory report released Wednesday by the U.S. Energy Information Administration failed to boost oil prices despite showing across-the-board drawdowns from petroleum stockpiles. Gasoline inventories declined for the seventh straight week through March 31, down 4.1 million barrels (bbl) to a 13-week low 222.6 million bbl. Distillate fuel oil inventories also fell by a larger-than-expected margin, down 3.6 million bbl from the previous week to 113.1 million bbl, and are now about 12% below the five-year average, EIA said. Gasoline supplied to the U.S. market -- a measure of demand -- jumped to the highest weekly rate so far this year at 9.295 million barrels per day (bpd), a full 8% above the comparable 2022 demand rate. Demand for distillate fuels improved by 527,000 bpd to 4.240 million bpd during the week ended March 31, up 593,000 bpd against the comparable week a year ago.

At settlement, West Texas Intermediate futures for May delivery ticked up $0.09 to $80.70 per bbl, and international benchmark Brent posted a modest gain to $85.12 per bbl. NYMEX May RBOB futures eased $0.0068 to $2.8133 per gallon, while May ULSD futures declined $0.0705 to $2.6605 per gallon.

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