DTN Oil

WASHINGTON (DTN) -- After retreating for four consecutive sessions, West Texas Intermediate futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Friday's session with modest gains, although both benchmark contracts lost as much as 6% this week amid persistent concerns over global oil demand.

Friday's higher settlements came after U.S. manufacturing data for the month of April surprised to the upside this morning, lifting the U.S. Dollar Index and Treasury yields. At 50.40 reading, U.S. manufacturing index moved out of contraction to the highest reading since October 2022. The survey data is a forward-looking indicator and highlights an economy that wasn't bruised as much as it was feared by the March banking crisis.

"The latest reading is indicative of GDP growing at an annualized rate of just over 2%," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

The survey also showed prices paid by operators in the service sector are growing again, underscoring persistent inflationary pressures.

It's worth noting that one data point cannot tell the full picture and there are plenty of macroeconomic indicators pointing to weakness, but it certainly raises the possibility that the Federal Reserve's rate hiking cycle won't end on May 3. The market is pricing in a 90% chance for a 25-basis-point increase in the federal funds rate when the Federal Open Market Committee meets in less than two weeks' time and is now pricing in a modest chance for another rate hike on June 14.

Oil complex came under modest selling pressure earlier in the session after overnight macroeconomic data showed European industrial sector fell into deeper contraction this month, with the headline index for manufacturing activity eroding to the lowest level since May 2020.

The European manufacturing sector has remained in contraction for the tenth straight month and shows little signs of recovery in the foreseeable future. More positively, Eurozone business activity in the service sector accelerated to a 12-month high 56.6, lifting the composite PMI solidly into growth territory.

"The upturn was driven by reviving demand and was accompanied by the largest increase in employment in nearly a year. Growth became increasingly uneven, however, with resulting outperformance of services relative to manufacturing was the widest since early 2009, and the survey has not yet previously recorded such a strong service sector expansion at a time of manufacturing decline," read comments accompanying the data's release.

Possibly contributing to manufacturing weakness were widespread protests in France that prompted shutdowns of industrial facilities and power plants.

Oil traders pay close attention to manufacturing data given the energy-intensive nature of the industrial sector versus private consumption that has grown increasingly energy-efficient in recent years.

At settlement, NYMEX June WTI futures advanced $0.50 to $77.87 barrel (bbl), with international crude benchmark ICE Brent futures for June delivery gaining to $81.66 bbl, up $0.56. NYMEX May RBOB futures moved $0.0152 higher to $2.6016 gallon and May ULSD futures edged $0.0063 lower to $2.4886 gallon.