DTN Oil

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude traded on the Intercontinental Exchange fell Tuesday, with the West Texas Intermediate and Brent benchmarks retreating for the second straight session under pressure from disappointing macroeconomic data for China and market jitters stimulus measures from its central government would be insufficient to drive sustainable economic growth.

Macroeconomic data released Monday night shows Asia's largest economy continues a downward trajectory, with consumer spending sputtering and industrial production missing market expectations for the third straight month. The People's Bank of China cut its key interest rate to the lowest level since the early days of the pandemic in 2020 to spur the economy.

Interestingly, the National Bureau of Statistics said it would suspend publishing data on China's unemployment rate for those 16 through 25 years old after the jobless rate for the age group skyrocketed to a record-high 21.3% in June. Economists widely forecast the jobless rate for that group to climb even higher through the end of the summer, as another batch of graduates enters the labor market.

Lower oil futures, with the crude contracts down more than $1 bbl and products futures losing 2% on the session, were realized as traders positioned ahead of the release of weekly U.S. inventory reports.

Consensus of analysts and traders surveyed by Wall Street Journal showed U.S. commercial crude oil inventories likely decreased by 1.7 million bbl during the week ended Aug. 11, with the range of expectations wide, from a 3.7 million bbl draw to a 2.5 million bbl build. At 445 million bbl, commercial crude oil inventories currently stand roughly in line with the seasonal five-year average. Gasoline inventories are expected to have fallen by 1.2 million bbl in the reviewed week, while distillate stocks, which are mostly diesel fuel, are seen to have declined by 100,000 bbl.

Combined gasoline and distillate stockpiles fell by more than 4.4 million bbl in the previous week, pressing inventories well below the seasonal five-year average. Gasoline inventories currently sit 7% below the five-year average at 216.4 million bbl, and distillate stockpiles fell to 115.4 million bbl, some 17% below the five-year average, Energy Information Administration data shows. Refinery use likely climbed by 0.3% from the previous week to 94.1% of capacity.

The American Petroleum Institute will release its weekly inventory survey at 4:30 PM ET, followed by official data from the U.S. EIA Wednesday morning.

Renewed strength in the U.S. dollar joined China's bearish macroeconomic data in pressuring oil futures, with the dollar strengthening after settling at a two-month high on Monday. Census Bureau data released Tuesday morning showed U.S. retail sales surprised to the upside in July with a 0.7% jump, the largest monthly gain since January, underpinned the strength in the U.S. currency. When excluding motor vehicles and parts, total retail sales increased by a larger 1% in the reviewed month, led by higher spending on non-store retailers and food services and drinking places.

The fresh data suggests the American consumer continues to have the wherewithal to spend on services, bolstering aggregate demand, but presents challenges for the Federal Reserve that has tried to cool the economy with an aggressive rate hike cycle. Following the data's release, investors slightly raised the odds for one more increase of 0.25% in the federal funds rate to a 5.5% by 5.75% target range at the Federal Open Market Committee's November meeting.

At settlement, WTI September futures on NYMEX declined $1.52 to $80.99 bbl, and ICE Brent for October delivery fell below $85 bbl to $84.89 bbl, down $1.32. NYMEX RBOB September futures dropped back $0.0586 to settle at $2.8476 gallon, and front-month ULSD futures declined $0.0603 to $3.0280 gallon.

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