DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange settled Thursday's session modestly higher as falling oil inventories in Cushing, Oklahoma joined with signs of weakening crude exports from Saudi Arabia and Russia – OPEC+ largest oil producers - to offset a rallying U.S. dollar index and lift West Texas Intermediate above key resistance at $75 bbl.

On the session, NYMEX August West Texas Intermediate advanced $0.28 to expire at $75.63 bbl after briefly dipping to $74.72 bbl, an intra-session low. Next month WTI futures settled the session a tad higher at $75.65 bbl. International crude benchmark Brent for September delivery added $0.18 to finish at $79.64 bbl.

NYMEX August RBOB futures rallied $0.0227 to $2.7432 gallon, and August ULSD futures strengthened to $2.6644 gallon, up $0.0226 in afternoon trade. The U.S. dollar index spiked 0.58% against the basket of foreign currencies to settle the session above a key 100-mark.

Greenback's renewed strength follows another weekly drop in U.S. jobless claims that continue to signal a resilient labor market despite expanding pockets of weakness in the broader economy. U.S. Labor Department reported this morning initial unemployment claims fell for the third straight week through July 15 to a seasonally adjusted 228,000 applications. This marked the lowest level since mid-May. Economists widely expected the labor market to show signs of rising layoffs this summer amid a manufacturing recession and slowing consumer spending. For context, U.S. retail sales slowed more than expected in June, the Census Bureau reported this week, rising just 0.2% -- below an expected 0.5%.

This might suggest that typical transmission lines between the labor market and the strength of underlying demand might have been compromised during the pandemic months as employers are now more inclined to hoard labor.

In reaction to the data, investors boosted bets the Federal Reserve would again lift interest rates after the July 26^th meeting that is widely expected to deliver another quarter basis point rate hike. This would lift federal funds rates to a 5.25% and 5.5% range -- a nearly 22-year high.

Further boosting the oil complex, U.S. Energy Information Administration reported mid-morning Wednesday that oil stored in Cushing farm tanks – delivery point for the WTI contract- plunged 2.9 million bbl during the week-ended July 14. This marked the steepest drawdown in Cushing stockpiles in nearly two years, adding to evidence global inventories are gradually drawing as a result of OPEC+ extended production cuts announced on June 4. EIA said in its latest Short-Term Energy Outlook that global oil inventories will gradually transition from builds seen over the first half of the year to consistent draws until the fourth quarter 2024.

"This transition puts upward pressure on global oil prices over the forecast period. Global oil inventories increased by an average of 0.6 million bpd in 1H23, and we forecast they will decrease by an average of 0.7 million b/d in 2H23. Inventories continue to fall by an average of 0.4 million b/d in the first three quarters of 2024 before increasing by 0.1 million b/d in 4Q24," said EIA in the July STEO.

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