DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange softened in pre-inventory trade Wednesday despite data from the American Petroleum Institute showing a much larger-than-expected drawdown occurred in U.S. crude and gasoline stockpiles during the week ended April 22. The reported 6.083-million-barrel (bbl) crude draw far surpassed an expected 700,000 decline and follows yet another 4.6-million-bbl downturn reported in the prior week. If confirmed by EIA data Wednesday morning, this will push commercial crude oil inventories roughly in line with the five-year average level. At 466.0 million bbl, U.S. crude oil inventories currently stand about 2% above the five-year average. API data further showed that stocks at the Cushing, Oklahoma, tank farm -- the New York Mercantile Exchange delivery point for West Texas Intermediate futures -- added 465,000 bbl. Gasoline inventories, meanwhile, dropped by 1.919 million bbl in the reviewed week, more than twice an expected 700,000-bbl downturn. On the bearish side, API reported a build of 1.693 million bbl in distillate inventory versus an expected decline of 400,000 bbl. The U.S. Energy Information Administration will release its weekly inventory report at 10:30 a.m. EDT.

Oil traders will also monitor demand figures in this week's EIA report amid signs that the U.S. consumer is pulling back ahead of the busy travel season. The U.S. consumer confidence index fell to a nine-month low 101.3 in April, reflecting persisting worries over a recession and softening labor market.

"Compared to last month, fewer households expect business conditions to improve and more expect worsening of conditions in the next six months. They also expect fewer jobs to be available over the short term," said Ataman Ozyildirim, senior director of economics at The Conference Board.

More evidence of a consumer pullback can be found in high frequency data published by OpenTable.com that showed seated diners at restaurants across the United States over the first two weeks of April were 7% below the comparable two weeks in 2022, the largest year-on-year decline so far in 2023. That doesn't bode well for gasoline demand in the U.S. that correlates closely with the strength of the labor market and discretionary spending.

U.S. macroeconomic data for the month of April have been mixed so far, showing marginal rebounds in regional manufacturing activity but a broader pullback in consumer spending. The Dallas Federal Reserve's Manufacturing Survey released Monday showed industrial activity in the region turned choppy in April after a slight upswing recorded in the prior month, with business outlook remaining deeply negative.

"There is a definite slowdown. New orders virtually stopped. We are hoping it is short lived," said a representative with a machinery manufacturer. "We are in the trucking industry. There has been some continued degradation of indicators in our market, such as dropping freight rates. We are still planning on a solid business year but with some decrease compared with the past 12 months," said a representative with a transportation equipment manufacturer.

Near 8:45 a.m. EDT, NYMEX June WTI futures fell $0.57 to $76.50 bbl, while international crude benchmark ICE Brent futures for June delivery declined $0.88 to $79.89 bbl. NYMEX May RBOB futures eroded to $2.5748 gallon, down $0.0138 in overnight trading, and May ULSD futures dropped back $0.0377 to $2.4134 gallon.