DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Wednesday's session higher after U.S. consumer price index showed inflation eased more than expected last month, meaning consumers might have more money to spend for road trips and airplane tickets this summer travel season, boosting fuel demand in the service sector of the economy.

U.S. inflation fell to the lowest level since May 2021, with prices paid for groceries falling for the first time since September 2020, providing welcome relief for many American families. Prices for such key food items as eggs, fruits and vegetables declined sharply from the prior month. The broader food category was unchanged at 0% for the first time since November 2020. What's more, prices paid for energy, including gasoline and fuel oil, decreased by more than 4% from the prior month, sending overall energy index tumbling 6.4% against a year earlier.

March's CPI report, however, also revealed the core consumer price index -- which excludes food and energy and is closely watched by the Fed -- still rose 0.4% following a 0.5% gain, reflecting the sticky nature of services inflation. The core CPI was up 5.6% from a year ago. It's the first time in over two years that the core came in above headline measure, which was up 5%. Some economists, however, argue that the core measure of inflation tends to lag the headline and will soon follow the underlying trend lower.

U.S. dollar declined more than 0.7% against a basket of foreign currencies on Wednesday, spurring gains for West Texas Intermediate futures that settled the session $1.73 bbl higher at $83.26 per barrel (bbl). International crude benchmark Brent contract for June delivery added $1.72 per bbl for a $87.33-per-bbl settlement. NYMEX May RBOB futures gained $0.0075 to $2.8727 per gallon, and the May ULSD contract rallied to $2.7031 per gallon, up $0.0349 per gallon.

Further spurring gains for the oil complex, U.S. Energy Information Administration midmorning reported gasoline inventories declined for the eighth straight week through April 7, down a modest 330,000 bbl to a 13-week low 222.2 million bbl. The draw was well below estimates for a 1.7-million-bbl decline but somewhat in line with a 450,000-bbl build reported by the American Petroleum Institute. Demand for gasoline declined 359,000 barrels per day (bpd) from the previous week to 8.936 million bpd after jumping to the highest weekly rate this year at 9.295 million bpd in the prior week. Over the four-week period ended April 7, implied gasoline demand averaged 9.1 million bpd, 5.5% higher than the comparable four-week consumption rate last year.

The U.S. refinery run rate continued lower for a second week through the reviewed period, down 0.3% to an 89.3% utilization rate. U.S. crude oil refinery inputs averaged 15.6 million bpd during the week ending March 31, 30,000 bpd less than the previous week's average.

In distillate fuels, inventories fell 606,000 bbl from the previous week to 112.4 million bbl, and are now about 12% below the five-year average, the EIA said.

EIA data shows distillate fuel oil, overwhelmingly diesel, supplied to the U.S. market decreased by 477,000 bpd to 3.763 million bpd during the week-ended April 7.

Commercial crude inventory in the United States unexpectedly increased by 597,000 bpd to 470.5 million bbl. The build was contrary to analyst expectations for a 600,000 bbl drawdown.

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

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