DTN Oil

WASHINGTON (DTN) -- Following Wednesday's rally fueled by an outsized draw in U.S. commercial crude oil inventories, oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange advanced again Thursday after stronger-than-expected macroeconomic data in the United States eased concerns over looming recession tied to an aggressive rate-hiking campaign from the Federal Reserve.

The U.S. economy appears to have shrugged off 5% interest rates easily. Gross Domestic Product confounded economists with a 2% annualized growth rate in the first quarter, according to the third and final estimate from the Bureau of Economic Analysis compared to 1.4% expected.

"The updated estimate primarily reflected upward revisions to exports and consumer spending," said BEA, adding that this was partly offset by downward revisions in other areas such as nonresidential fixed investment.

The revision comes as the labor market in the United States remains extraordinarily tight heading into the second half of the year, with weekly unemployment claims showing little sign of layoffs materially rising. In the week ended June 24, initial jobless claims came in at 239,000, a decrease of 26,000 from the previous week's revised figure. This is the first weekly drop in initial claims in the past six weeks.

It might be good news for the economy but not for the Federal Reserve that has been trying to cool off the economy and excess consumer demand. This raises the question of how high the Fed will need to hike rates to tame inflation. The market now sees an 85% chance of a 25-basis-point hike in July and a nearly 50% chance of another hike in November.

Further spurring gains in the oil complex, inventory report released by the U.S. Energy Information Administration on Wednesday showed a massive drop in commercial crude oil inventories as exports surged to the second strongest weekly pace on record. Further details of the report revealed commercial crude stocks plunged 9.6 million barrels (bbl) in the week ended June 23 -- the largest weekly draw in commercial crude oil inventories so far this year. This leaves U.S. commercial crude stocks 9.2% or 38.1 million bbl above year-ago levels.

The outsized crude draw offset modest builds to gasoline and distillate fuel oil, leading total commercial petroleum stocks 5.2 million bbl lower on the week. The outsized drop also came despite a 1.4-million-bbl transfer of oil last week from the nation's Strategic Petroleum Reserve and a sharp reduction in refinery run rates.

U.S. refiners processed an average 16.3 million barrels per day (bpd) of crude oil, 215,000 bpd less than in the prior week. Demand for refined fuels also picked up slightly, with four-week average gasoline consumption in the United States jumping to the highest level since December 2021 at 9.3 million bpd.

At settlement, West Texas Intermediate August futures rallied $0.30 bbl to $69.86 bbl and international crude benchmark Brent for August delivery gained $0.31 to $74.34 bbl. The next-month delivery September Brent contract settled the session with a $0.17-bbl premium to the expiring contract, as Brent's backwardation along the forward curve continues to unwind.

NYMEX RBOB July futures advanced $0.0143 to $2.6177 gallon, with next-month August futures settling at $2.5034 gallon. NYMEX ULSD July contract edged higher to $2.4156 gallon, and the August contract gained to $2.4072 gallon. ICE Brent August, NYMEX RBOB and ULSD July futures expire Friday (6/30) afternoon.

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