DTN Oil

WASHINGTON (DTN) -- Oil futures on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange powered higher early Friday, with all petroleum contracts on course for solid gains this week after spreading wildfires in Canada's oil-producing region of Alberta shut-in roughly 250,000 barrels (bbl) in daily output.

More than 2.7 million bbl in daily oil production is located within areas of "very high" or "extreme" wildfire danger rating zones, according to an independent research firm Rystad Energy. Unusually high temperatures for this time of the year have aided the intense spring wildfires in western Canada, displacing thousands of people and destroying property. Satellite images show that toxic cloud of burned particles has blanketed the region and dipped across the border into the United States.

"This is a very unusual pattern. We often don't see these types of patterns set up this early in the year. We see these patterns in the summer," said Terri Lang, a warning preparedness meteorologist for Environment and Climate Change Canada.

According to weather forecasts, the heatwave is likely to intensify over the weekend, likely causing further damage to communities and production fields.

Further spurring gains in the oil complex, the U.S. Dollar Index pulled back from Thursday's two-month high 103.455 settlement after several Federal Reserve officials indicated the U.S. central bank is not done with raising interest rates amid continued strength in the economy and labor market. St. Louis Federal Reserve President James Bullard in a Financial Times interview said he is leaning toward another 0.25% hike in the federal funds rate at the next meeting in June as "an insurance against inflation."

"I do expect disinflation, but it's been slower than I would have liked, and it may warrant taking out some insurance by raising rates somewhat more to make sure that we really do get inflation under control," Bullard said in the interview.

Similar sentiment was echoed in the comments from the Dallas Fed President Lorie Logan who said, "The pause is not in order, though that could change in the coming weeks depending on the data."

The U.S. economy defied all expectations this year while sustaining a low unemployment rate amid high inflation and increasingly restrictive interest rates that are now above the annual rate of inflation. Thursday's economic data showed the number of Americans filing for unemployment benefits unexpectedly dropped last week by the most since 2021, while continued claims that measure those who receive unemployment benefits for consecutive weeks also dropped to 1.79 million.

With the labor market largely intact, Americans increased their retail spending in April for the first time in three months, according to the U.S. Commerce Department. Retail sales -- a measure of spending at stores, online and in restaurants -- rose a seasonally adjusted 0.4% in April from the previous month after declining in February and March -- a sign of consumers continued resilience despite high inflation and rising interest rates.

Faced with this conundrum, some Fed officials even suggested that the Federal Open Market Committee could "skip" the meeting in June to adopt a "wait-and-see" approach before committing to either pausing or raising interest rates further.

Next, investors will be parsing through the comments from the Fed Chairman Jerome Powell who will sit down with his predecessor, Ben Bernanke, for a question-and-answer session at the Thomas Laubach Research Conference in Washington later Friday morning.

The event will mark Powell's first public appearance since the Fed's last policy meeting on May 3, when the central bank lifted its benchmark federal funds rate for the tenth consecutive time, taking it to a 2007 high of between 5% and 5.25%.

Near 7:45 a.m. EDT, West Texas Intermediate futures for June delivery advanced $0.80 to $72.63 bbl, and the international crude benchmark Brent contract gained to $76.67 bbl, up $0.83 bbl. NYMEX RBOB June futures rallied $0.0192 to $2.5875 gallon, while ULSD June futures advanced $0.0146 to $2.4172 gallon.

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