Oil Futures Gain on US Retail Sales, Product Draws

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange pushed higher in pre-inventory trade Wednesday after an industry survey showed domestic gasoline and distillate fuel inventories fell for the second week through May 12, while solid U.S. retail sales for April offered more evidence that consumer spending is likely to support demand expansion into the summer months.

The American Petroleum Institute reported Tuesday commercial gasoline inventories dropped by 2.46 million barrels (bbl) last week, nearly twice calls for a 1.3-million-bbl draw. Further details of the report showed distillate fuel inventories also declined by 886,000 bbl in the reviewed week compared with estimates for no change. If confirmed by official data from the U.S. Energy Information Administration, this would mark the second consecutive weekly drawdown from commercial fuel inventories. EIA will release its weekly data at 10:30 a.m. EDT.

Meanwhile, U.S. commercial crude oil inventories unexpectedly built by 3.69 million bbl versus an expected decline of 800,000 bbl. Stocks at the Cushing, Oklahoma, tank farm -- the New York Mercantile Exchange delivery point for West Texas Intermediate futures -- increased 2.87 million bbl. Expectations for a modest crude draw are due partly to a Department of Energy announcement Monday indicating it disbursed another 2.4 million bbl of crude last week from the nation's Strategic Petroleum Reserve to the commercial side. That brings emergency crude supplies down to a more-than 40-year low of 360 million bbl.

In financial markets, the U.S. Dollar Index jumped against global peers to a 1-month high 102.795 Wednesday morning after government data showed Americans increased their retail spending in April for the first time in three months. The U.S. Commerce Department said retail sales -- a measure of spending at stores, online and in restaurants -- rose a seasonally adjusted 0.4% last month from the month before after declining in February and March -- a sign of consumers' continued resilience despite high inflation and rising interest rates. April's modest increase in retail spending may reflect consumers' continued shift from buying goods during the pandemic years to paying more for services, including airfares and restaurants.

This shift, however, doesn't bode well for large export-oriented manufacturing economies like China which has struggled to sustain its post-COVID rebound. Tuesday's data showed China's retail sales and industrial production for April broadly missed expectations amid an uneven recovery. Industrial production rose 5.6% year-on-year compared to the 10.9% expansion expected by economists and a mere 1.7% above the March level. This follows the latest PMI data that showed business activity across China's manufacturing sector fell into contraction last month for the first time since the lifting of COVID lockdowns in late 2022. Without adequate demand for manufactured products from Western countries, China is likely to struggle with the trajectory of its post-COVID recovery.

Near 7:30 a.m. EDT, West Texas Intermediate for June delivery advanced $0.30 to $71.15 bbl and international crude benchmark Brent for July delivery gained to $75.22 bbl, up by $0.31 bbl in overnight trade. NYMEX RBOB June futures added $0.0179 to $2.4970 gallon, while ULSD June futures firmed to $2.3730 gallon.

Liubov Georges