DTN Oil

WASHINGTON, D.C. (DTN) -- Following Wednesday's rally fueled by the 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 softened in morning trade Thursday as investors assessed stronger-than-expected U.S. macroeconomic indicators.

Government data released this morning showed U.S. gross domestic product expanded 2% during the first three months of the year, far exceeding expectations for a 1.4% growth. U.S. Department of Commerce previously estimated first quarter GDP at 1.3%. "The updated estimate primarily reflected upward revisions to exports and consumer spending," said the department in a report, adding that this was partly offset by downward revisions in other areas such as non-residential 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 picking up pace. In the week ending 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.

The consumer confidence index released earlier this week by the Conference Board also came in stronger than expected, jumping to its highest level since January 2022, as both the present situation and expectations components rose.

"Greater confidence was most evident among consumers under age 35, and consumers earning incomes over $35,000. Nonetheless, the expectations gauge continued to signal consumers anticipating a recession at some point over the next 6 to 12 months," said Dana Peterson, chief economist at The Conference Board.

It must be noted, however, that the index is still well below the levels associated with a healthy economy.

Wednesday's inventory report released by the U.S. Energy Information Administration was mostly supportive for the oil complex, showing 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 bbl in the week ending 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 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.

The bullish inventory report reignited buying interest in the oil complex driven by the narrative of a tighter physical oil market in the second half of the year. Following the OPEC+ announcement on June 4 to extend production cuts through the end 2024 joined with Saudi Arabia's decision to unilaterally cut output by 1 million bpd in July, some analysts forecast global oil inventories will begin gradually falling in each of the next five quarters, putting upward pressure on oil prices.

Near 9 AM ET, West Texas Intermediate August futures traded near $69.63 bbl and international crude benchmark Brent for August delivery gained $0.12 to $74.17 bbl. The next-month delivery September Brent contract is trading at a $0.21 bbl premium to the expiring contract, as Brent's backwardation along the forward curve continues to unwind.

NYMEX RBOB July futures slipped $0.0102 to $2.5932 gallon, with next-month August futures trading at $2.5932 gallon. NYMEX ULSD July contract edged higher to $2.4256 gallon, and the August contract gained to $2.4097 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