WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled Wednesday's session higher as the U.S. dollar extended losses into a fifth consecutive session pressured by softer inflation data and a weaker-than-expected employment report as investors upped their bets that the Federal Reserve would not have to raise interest rates more aggressively later this year.
U.S. Bureau of Labor Statistics this morning reported inflation in the United States declined for the 12th consecutive month in June, dropping from 4% year-over-year in May to 3%, led by a retreat in energy and food prices. This marked the lowest annualized inflation level since May 2021.
The core consumer price index, which excludes energy and food prices, also dropped to a better-than-expected 4.8% from decades-high 6.4%, led by a gradual but slow easing of housing prices.
Some caution, however, that although inflation in the goods sector remains subdued and housing likely saw further deceleration of prices, the Fed needs to see more of a slowdown in core services ex-housing to be confident that headline inflation is headed to its 2% target. For this to happen, labor market conditions need to soften further and with it wage growth.
In reaction to the data, the U.S. dollar index plunged 1.2% against a basket of foreign currencies to settle at a 15-month low 100.193. Oil is bought and sold around the world in U.S. dollars, therefore a cheaper greenback makes crude more attractive for foreign buyers.
At settlement, NYMEX August West Texas Intermediate advanced $0.92 to a better-than-three-month high $75.75 bbl and international crude benchmark September Brent contract topped $80 bbl, rallying $0.71 on the session. NYMEX August RBOB futures advanced $0.0443 to $2.6670 gallon, and August ULSD futures moved higher to $2.5996 gallon, up $0.0159 on the session.
Oil complex mostly shrug off a bearish inventory report from the U.S. Energy Information Administration, showing domestic crude oil supplies spiked 5.9 million bbl last week compared with expectations for inventories to have declined by a modest 100,000 bbl. That brought stockpiles to approximately 1% above the five-year average. The hefty build came despite domestic refiners hiking crude throughputs 630,000 bpd from the previous week to the highest weekly rate so far this year at 16.659 million bpd.
U.S. crude oil production, meanwhile, slipped 100,000 bpd last week to 12.3 million bpd.
In the gasoline complex, commercial inventories declined 4 million bbl to 219.5 million bbl last week despite demand for the transportation fuel sliding 843,000 bpd from the prior week for an 8.756 million bpd consumption rate. Diesel stockpiles built by 4.8 million bbl to 118.2 million bbl last week, and are now about 14% below the five-year average, EIA said. Analysts expected distillate inventories would slip by 100,000 bbl. Demand for the middle of the barrel fuel nosedived 842,000 bpd from the previous week to 2.969 million bpd. On a four-week average basis, distillate fuel demand averaged 3.8 million bpd, up 0.6% from the same period last year. Distillate fuel supplied to the domestic market averaged 3.5 million bpd over the past four weeks, down 7.3% from the same period last year.
Liubov Georges can be reached at Liubov.Georges@dtn.com