DTN Oil

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude traded on the Intercontinental Exchange slipped in market-on-close trade Friday, although both crude benchmarks registered weekly gains as investors responded to disrupted oil production in the United States following subfreezing weather this week, which also knocked refinery capacity offline in Texas.

In North Dakota, about 650,000 bpd of oil production was shut in by frigid weather and heavy snowfall that caused wellhead freeze-offs, disrupting operations in Bakken basin oil fields. Some 280,000 bpd of oil production remained shut in Friday afternoon, according to the North Dakota Oil and Gas Division, and it might take a month for the lost output to be brought back online. Before the disruption, North Dakota oil production averaged about 1.25 million bpd, with output reaching an all-time high of 1.52 million bpd before the pandemic in November 2019.

The U.S. oil rig count fell to a 497 10-week low Friday, according to Baker Hughes.

In financial markets, investors continue to reprice the path of the federal funds rate this year, reducing odds for a March rate cut to less than 50% after the latest reading of consumer sentiment. The University of Michigan on Friday reported their U.S. consumer sentiment index surged this month to the highest reading since mid-2022 at 78.8, gaining a staggering 30% over the most recent two-month period -- the largest gain since 1991.

"Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations," said Surveys of Consumers Director Joanne Hsu, adding that "there was a broad consensus of improved sentiment across age, income, education, and geography."

The headline inflation rate is currently running at around 3.4% -- a marked improvement from its peak of 9.1% seen in June 2022. In comparison, average hourly earnings have caught up with the inflation rate, surpassing inflation in the final months of 2023, averaging 4.1% in December. In plain terms, the American consumer's purchasing power improved as paychecks grew and inflation receded.

December's retail sales data released Wednesday by the U.S. Census Bureau offers further evidence of the strength of the U.S. consumer, with nominal sales increasing by the most in three months, up 0.6%, while unemployment claims have tracked near post-pandemic lows.

While the data is good news for the economy, it dashed expectations for aggressive rate cuts by the Federal Reserve, which had priced a 25-basis point cut in the federal funds rate in March on expectations for softer economic growth and falling inflation. At a Brookings Institute event this week in Washington, D.C., Federal Reserve Governor Christopher Waller cautioned that the central bank is "not rushed" to lower policy rates as has been the case in the prior rate-cutting cycles.

"A strong economy gives us the flexibility to move methodically and carefully on rate policy," said Waller.

At settlement, West Texas Intermediate for February delivery on NYMEX eased $0.67 bbl to $73.41 bbl, with the March contract ending at a $0.16 discount to the spot-month contract. February WTI futures expire at the closing bell on Monday (1/21). ICE March Brent futures declined $0.54 to settle at $78.56 bbl. NYMEX February RBOB futures slipped $0.0207 to $2.1628 gallon, and February ULSD futures fell back $0.0315 to $2.6621 gallon.

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