DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Monday's session mixed, with the U.S. crude benchmark slipping back below $80 per barrel (bbl) under pressure from a rallying U.S. dollar index as investors hedged their bets against another expected interest rate increase at the Federal Reserve's next meeting in May amid still strong job growth and ongoing momentum in the service sector of the economy.

West Texas Intermediate futures settled below $80 per bbl on Monday for the first time since the April 2nd decision by OPEC+ to cut oil production by 1.6 million barrels per day (bpd) as traders grew more uncertain ahead of a busy week for macroeconomic data. U.S. consumer price index and producer price index, to be released Wednesday and Thursday, respectively, will be important determining factors on whether the Fed will pause its rate hiking campaign next month.

As of Monday, more than 70% of investors expect the central bank will raise rates again by 0.25% at the May 3 Federal Open Market Committee meeting, which would lift the federal funds rate to a 5%-to-5.25% target range. The chorus of central bank officials have long promised to take the fed funds rate above 5%, and March's employment report gave little reason for them to reconsider.

For one, U.S. employers added a hefty 236,000 new jobs in March, with leisure and hospitality being the key driver behind overall employment growth. Employment in retail, construction, manufacturing, and financial services, however, all saw job losses in March as businesses grappled with slowing consumer demand. The U.S. unemployment rate ticked lower to 3.5% amid an increase in the labor participation rate that ran contrary to expectations that it would hold at 3.6%.

Interestingly, Friday's employment report comes after the Labor Department on Thursday made sizable revisions to weekly jobless claims, 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. The recent trend in layoffs suggests job losses that have started in some pockets of the economy are now broadening.

Separately, International Monetary Fund said in its spring economic report that the next five years will see the slowest growth since 1990, and it could be a "severe blow" to the world economy. IMF expects the world economy to grow less than 3% this year, down from 3.4% last year, and well below the average of 3.8% over the past two decades.

"Persistently high interest rates, a series of bank failures in the U.S. and Europe, and deepening geopolitical divisions are threatening global financial stability," said IMF head Kristina Georgieva. "Advanced economies face the challenges of high inflation and poorer nations are burdened by debt, all as the United States, the European Union and others are rethinking their trade relationships with China," Georgieva added.

At settlement, the U.S. dollar rallied 0.72% against a basket of foreign currencies to finish at 102.249, pressuring WTI futures for May delivery below $80 per bbl at $79.74 per bbl, down $0.96 on the session. International benchmark Brent contract fell back $0.94 to $84.18 per bbl. NYMEX May RBOB futures eased $0.0054 to $2.8079 per gallon, while May ULSD futures gained $0.0209 to $2.6814 per gallon.

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