DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange settled Thursday's session sharply higher after stronger-than-expected macroeconomic data in the United States fueled positive sentiment that the economy is on course to achieve the elusive "soft landing" of lowering inflation without triggering a recession.

The U.S. economy expanded at a 2.4% annualized rate during the second quarter, according to the advanced estimate released Thursday morning from the Bureau of Economic Analysis, reflecting contributions from personal consumption and business investments. This represents a 0.4% acceleration in growth from the first three months of the year and well above expectations for a 1.5% print. Economic growth is now roughly in line with the rate seen over the years leading up to the pandemic.

"Yet another upside data beat for a robust and agile U.S. economy -- this as consumer demand remains strong, disappointing yet again those who have been predicting a recession since last year," tweeted Chief Economic Adviser at Allianz Mohamed El-Erian.

A resilient economy comes as inflation is gradually easing from its 2022 highs and the labor market remains strong despite the most aggressive tightening cycle in decades. The Federal Open Market Committee raised borrowing costs yet again by 0.25% on Wednesday to a 5% to 5.25% range -- the highest level in 22 years.

"We've raised the federal funds rate now by 525 basis points since March 2022," Federal Reserve Chairman Jerome Powell told reporters in Washington during a news conference Wednesday afternoon. "Monetary policy, we believe, is restrictive and is putting downward pressure on economic activity, labor market and inflation."

There is some evidence that the labor market is cooling, with employers adding the least number of jobs in June since the first year of the pandemic, but that has not led yet to widespread layoffs. Weekly unemployment claims released Thursday morning showed the number of Americans who filed for unemployment insurance declined for the third straight week through July 27 and now stand at their lowest level since February.

Historically, a strong labor market in the United States has been supportive for gasoline consumption. However, the relationship is not as strong now as it was before the pandemic, with more people working from home eroding gasoline demand for commuting to work.

Wednesday's inventory report from the U.S. Energy Information Administration revealed that gasoline demand remained below 9 million barrels per day (bpd) for the third straight week in July at 8.9 million bpd, a weak consumption rate midway through the peak driving season. Gasoline supplied to the U.S. market in July, a measure of demand, continues to trail the pre-pandemic level seen in 2019, averaging nearly 700,000 bpd or 7.3% below the comparable consumption rate during the first three weeks of July 2019.

Despite the demand weakness against a year ago, gasoline inventory has been drawn down, falling 4.405 million barrels (bbl) or 2% during the four weeks ended July 21 to an eight-week low 217.6 million bbl, EIA data shows. Gasoline inventory is 7.5 million bbl or 3.3% below the same week in 2022.

Gulf Coast refineries have suffered for weeks amid extreme heat, prompting unplanned outages. Currently, a gasoline-making unit at ExxonMobil's 522,500-bpd Baton Rouge refinery in Louisiana is shut for three to four weeks of unplanned repairs after tripping offline on July 20.

On the session, West Texas Intermediate contract for September delivery rallied $1.31 per bbl to settle at $80.09 per bbl, the first settlement above $80 per bbl since mid-April. ICE September futures settled the session up $1.32 at $84.24 per bbl, also a 15-week high settlement.

NYMEX RBOB August futures rallied $0.0433 to settle the session at the highest price point since late November 2022 at $2.9505 gallon, and ULSD futures advanced $0.0740 to $2.9169 gallon -- the highest settlement since February.

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