DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange rallied during the final session of the first quarter with bullish macroeconomic data accelerating an advance after contracts reversed off technical support points midweek.

In its final estimate for fourth-quarter 2023 U.S. gross domestic product, the Bureau of Economic Analysis (BEA) said Thursday morning that the U.S. economy grew at a 3.4% annualized rate, adjusting the expansion rate 0.2% higher from the month prior. The greater-than-expected economic expansion was primarily fueled by upward revisions to consumer spending and nonresidential fixed investment, according to the BEA.

The resilience of the U.S. economy despite the Federal Reserve's monetary tightening cycle has repeatedly caught markets off guard, belying expectations at the start of the central bank's rate hiking cycle for recession. U.S. GDP growth did slow from a 4.9% growth rate for the third quarter 2023 while the Federal Reserve Bank of Atlanta's GDPNow forecast calls for a 2.1% expansion for the first quarter.

The University of Michigan released its Index of Consumer Sentiment a day earlier because of Good Friday with its consumer survey showing sentiment improved 3.3% in March.

"Critically, consumers exhibited confidence that inflation will continue to soften. Assessments and expectations of personal finances improved modestly from last month, as the perceived negative effects of high prices and expenses on living standards eased," said Joanne Hsu, who directed the survey.

Strong economic growth spurred in large part by consumer spending and easing inflation concerns, even if only slightly, could push off an expected start to a rate-cutting cycle by the Federal Open Market Committee (FOMC) if inflation remains sticky. FOMC will make its next decision on the federal funds rate, currently in a 5.25% by 5.5% target range, on May 1.

Expectations were limited FOMC would cut the rate on May 1, although the probability of maintaining the current target range increased from 90.4% on Wednesday to 95.8% Thursday, up from 81.3% at the end of February, according to CME's FedWatch Tool. The market still expects FOMC to trim the federal funds rate 25 basis points at its June 12 meeting, although today's economic data boosted those expecting no rate hike by 6.5% to a 36.4% probability.

The U.S. dollar index rallied 0.2% to a 104.269 six-week high in index trading Thursday, which failed to slow the advance by West Texas Intermediate (WTI) futures, which surged $1.82 to $83.17 per barrel (bbl). WTI futures gained $11.52 bbl or 16.1% in the first quarter, with $4.91 of the increase occurring in March. The U.S. dollar strengthened by 3.2% during the first three months of 2024.

ICE May Brent futures expired Thursday $1.39 higher at $87.48 bbl, with the June contract settling at a $0.48 discount. The advance by Brent crude in the first quarter came at a slower pace than WTI, climbing $10.44 or 13.6%, including $3.86 in March.

Both WTI and Brent futures tested Fibonacci retracement support this week before Thursday's rally.

NYMEX April RBOB futures rallied to a $2.7749-gallon seven-month high on the spot continuous chart, testing resistance at the $2.7795 trendline for the uptrend for the December 2022 low before expiring $0.0764 higher at $2.7611 gallon. The gasoline contract is in a seasonal uptrend amplified by a protracted refinery turnaround season dotted by unplanned outages, with commercial inventory drawn down 22.204 million bbl or 8.7% from late January to mid-March, according to data from the Energy Information Administration. During the first quarter, RBOB futures rallied $0.6585 gallon or 31.3%, with $0.4577 or 19.9% of the advance occurring in March.

NYMEX April ULSD futures expired $0.0170 higher at $2.6156 gallon, bolstered after testing support at the $2.5895 trendline for the downtrend from the April 2022 high. The ULSD contract gained $0.0625 or 2.4% in the first quarter after a $0.0682 gallon decline in March. ULSD's market structure moved out of backwardation for the first time since June 2023 this week.

Brian L. Milne can be reached at brian.milne@dtn.com