DTN Oil

WASHINGTON, D.C. (DTN) -- After retreating for the fourth straight session on Thursday, West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange erased all gains fueled by Saudi-led production cuts announced on April 2 as traders turned focus back to weak demand fundamentals in the United States amid disappointing manufacturing data and lackluster consumer demand.

NYMEX May WTI futures expired at $77.29 bbl, down $1.87 on the session, with the June contract settling near parity at $77.37 bbl. ICE June Brent futures fell $2.02 to $81.10 bbl. NYMEX May RBOB futures dropped back $0.0591 gallon to $2.5864 gallon, continuing a retreat from last week's five-month spot high of $2.8943. May ULSD futures declined for the sixth consecutive session, falling $0.0628 to $2.4949/gallon.

Concern over global oil demand is front and center of the narrative driving the oil market again, with both WTI and Brent on track to lose as much as 6% of their value this week. On the economic calendar today was the Philadelphia Fed Manufacturing index that has been in contraction for the last eight months, and very deeply so in April with a minus 31.3 reading. It is now at the lowest level since May 2020, when the government was in lockdown amid the pandemic. Along with slowing economic activity, prices paid, and prices received declined to their lowest readings since mid-2020, suggesting inflationary pressures are easing.

Nationwide, manufacturing activity also remains deeply in contraction at 46.3% in March -- also the lowest level since the pandemic's nadir in May 2020.

"Sales are slowing at an increasing rate, which is allowing us to burn through back orders at a faster-than-expected pace," said a representative in the transportation equipment industry.

Traders are laser-focused on demand fundaments in the United States and European Union amid recession jitters and signs of a retreating consumer.

Wednesday's inventory report released by the U.S. Energy Information Administration showed demand for gasoline fell 417,000 bpd to 8.519 million bpd. On a four-week average basis, gasoline supplied to the U.S. market eroded 4.2% below 2019 levels for the seasonal period. As a result, domestic gasoline stocks rose 1.3 million bbl in the week ending April 14. With summer travel season quickly approaching, traders are particularly concerned about the direction of fuel demand.

Further evidence of a weakening economy could be found in the Federal Reserve's Beige Book released Wednesday afternoon showing overall economic activity has been little changed in recent weeks, but lending volumes and loan demand have generally decreased across consumer and business loan types.

"Several districts noted that banks tightened lending standards amid increased uncertainty and concerns about liquidity" following the collapse of Silicon Valley Bank on March 10. Consumer spending, which accounts for two-thirds of the U.S. economy, "was generally seen as flat to down slightly," the Beige Book said. Wages remained elevated but showed some moderation and the labor market showed signs of loosening up, according to the report.