DTN Oil

WASHINGTON (DTN) -- While the ULSD contract was an outlier, settling Wednesday's session 3.5% lower, New York Mercantile Exchange West Texas Intermediate and RBOB futures and Brent crude on the Intercontinental Exchange followed equity markets higher after a softer-than-expected print for U.S. gross domestic product for the second quarter highlighted slower economic growth than previously believed, diminishing the risk that the Federal Reserve would raise interest rates later this year.

U.S. dollar eroded for the third straight session on Wednesday, having lost 0.37% in index trading against a basket of foreign currencies after the Bureau of Economic Analysis Wednesday morning downgraded second quarter U.S. GDP by 0.3% for annualized growth of 2.1% in its second of three estimates. The updated estimate primarily reflected downward revisions to private inventory investment and nonresidential fixed investment that were partly offset by higher state and local government spending.

The greenback has taken a beating this week, down 0.9% from the Aug. 25 nearly three-month high after simultaneous misses on U.S. job openings and a downbeat reading on U.S. consumer confidence prompted repricing of interest rate risk. As of Wednesday afternoon, an overwhelming majority of market participants believe the Federal Open Market Committee has concluded the current tightening cycle and will hold the federal funds rate in a 5.25% to 5.5% target range, according to CME's FedWatch Tool.

Separately, the weekly inventory report released midmorning by the U.S. Energy Information Administration showed commercial crude oil inventories plummeted by a much larger-than-expected 10.6 million bbl through Aug. 25, sustaining a destocking pattern for the third straight week. At 422.9 million bbl, commercial crude stocks currently sit at the lowest level since late December 2022 and about 3% below the seasonal five-year average.

Other bullish parts of the report were found in the gasoline complex, showing demand for gasoline climbed above 9 million bpd last week for the first time since late June. Gasoline stockpiles declined 214,000 bbl last week to 217.4 million bbl, about 5% below the five-year average.

EIA's report was, however, bearish for the distillate complex, showing demand for middle of the barrel fuel eroded further to 3.702 million bpd and stocks jumped 1.2 million bbl.

Also Wednesday, investors monitored the demand impact from Hurricane Idalia, which made landfall as a Category 3 hurricane near the Big Bend region of Florida Wednesday morning. DTN Weather Ops forecast Idalia will continue to track across southern Georgia towards the coast of South Carolina and southeast North Carolina over the next 24 hours, with intensity weakening to tropical storm status in the process. Major coastal flooding impacts will continue along the Gulf Coast of Florida, especially in the Big Bend where Idalia came onshore.

At settlement, the U.S. dollar plunged 0.375% to settle near a two-week low 103.093, spurring gains for the front-month WTI contract that gained to $81.63 bbl, up $0.47. The international crude benchmark Brent contract added $0.37 to settle at $85.86 bbl. NYMEX RBOB September futures advanced $0.0114 to $2.8019 per gallon. Moving in the opposite direction, NYMEX ULSD futures declined $0.1133 to settle at $3.0962 per gallon.

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