DTN Oil

WASHINGTON, D.C. (DTN) -- While ULSD was the outlier, reversing higher in afternoon trading, oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange declined on Thursday under pressure from a strengthening U.S. dollar. Government data showed gross domestic product in the third quarter expanded at the fastest rate in over two years despite higher interest rates.

U.S. economy grew at a neck-breaking 4.9% annualized rate during the third quarter, up from a 2.1% growth rate estimated for the April-June period and a tepid 0.9% expansion for the first three months of the year, according to data released Thursday morning by the U.S. Bureau of Economic Analysis. The fresh GDP data reflects an economy that not only absorbed the Fed's aggressive rate-hiking campaign but managed to reaccelerate on the back of robust consumer spending and a solid labor market.

"What we have looks like a soft landing, but whether this will hold depends on how hard high rates bite next year," U.S. Treasury Secretary Janet Yellen told Bloomberg TV Thursday afternoon.

What's notable is that the increase in consumer spending during the third quarter reflects some rotation in demand from services on the goods side of the economy, which should be supportive of manufacturing activity in the coming months. Supporting this view, U.S. durable goods orders spiked 4.7% in September -- more than double the 2% increase expected by economists.

This week's inventory report from the U.S. Energy Information Administration revealed demand for distillate fuels, which correlates closely with economic activity, remained above 4 million barrels per day (bpd) for the second straight week through Oct. 20, some 5% above the five-year average.

The Labor Department Thursday morning released high-frequency data showing unemployment claims remained in a 200,000 to 220,000 range for the eighth consecutive week through Oct. 21, although a stable labor market has yet to materialize in stronger gasoline consumption that continues to trail the five-year average. EIA data showed gasoline consumption in the most recent week averaged 8.8 million bpd, some 3% below the five-year average.

On the geopolitical front, oil traders continued to monitor developments surrounding the war between Israel and Hamas triggered by the Oct. 7 terrorist attack on Israeli citizens.

On Wednesday, Israeli Prime Minister Benjamin Netanyahu confirmed the military is preparing for a ground offensive into the Gaza Strip, increasing the risk of a wider regional conflict. Although vague on details, including the scope of the invasion, the comments from Netanyahu prompted some investors to re-price the potential for supply disruptions from the Middle East on Wednesday.

At settlement, NYMEX West Texas Intermediate futures for December delivery declined to $83.21 bbl, down $2.18 on the session, and international crude benchmark Brent for December delivery on ICE retreated $2.20 to $87.93 bbl. NYMEX November ULSD futures advanced $0.0134 to $3.0439 gallon, while front-month RBOB futures fell back $0.0281 to $2.2561 gallon.

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