DTN Oil

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled the first session of the second quarter mixed, with the crude and ULSD contracts lent upside support on expectations for increased demand during the second quarter as U.S. manufacturing emerged from contraction, while RBOB futures eased on anticipation for building gasoline inventory following the end of refinery turnaround activity.

Oil futures moved between gains and losses during the session, with extended production cuts by OPEC+ through the second quarter supportive while demand growth is uncertain. However, manufacturing reports from the world's two largest economies in kicking off April buttressed optimism for economic growth and support for the middle of the barrel. In the United States, manufacturing grew for the first time since September 2022, ending a 16-month contraction.

"Demand remains at the early stages of recovery, with clear signs of improving conditions. Production execution surged compared to January and February, as panelists' companies reenter expansion," said Timothy R. Fiore, CPSM, C.P.M., chair of the ISM Manufacturing Business Survey Committee.

Weak manufacturing has weighed on demand for diesel, which is down 1.7% in 2024 through March 22, according to the Energy Information Administration. EIA did show an improvement in the most recent four weeks of data, which is up 2.2% against the comparable year-ago period, coinciding with growth in domestic manufacturing.

NYMEX May ULSD futures reversed off a $2.5787 nearly three-month low on the spot continuous chart to settle up $0.0044 at $2.6271 gallon.

Caixin's General Manufacturing Purchasing Managers' Index for China, released Monday detailed an ongoing expansion in March, indicating manufacturing growth accelerated domestically and internationally, "adding to evidence of a sustained recovery in the world's second-largest economy despite a prolonged real estate slump and sluggish consumption."

Bank of America Global Research in a note to clients Monday pointed to demand growth for refined products during the first two months of 2024, citing data from China's National Bureau of Statistics and Customs office. During January and February, gasoline demand increased 15% against a year ago, diesel demand rose 9%, and jet fuel surged 59%.

"We attributed the growth of gasoline and kerosene to the fully recovered domestic travels during [the China New Year] compared to still dim consumption in 2M23 right after reopening," said the analysts with the bank's research unit.

NYMEX May West Texas Intermediate futures settled $0.54 higher at $83.71 bbl, trimming an advance to a $84.49 five-month high on the spot continuous chart. ICE June Brent futures also surged to a five-month high on a spot continuous basis at $87.98 bbl, settling Monday's session up $0.42 at $87.42 bbl.

U.S. refinery utilization increased for five consecutive weeks through March 22 to 88.7%, EIA data shows, as a lengthy seasonal maintenance period moved to closure. Refinery runs likely expanded again last week, lifting crude inputs while building gasoline inventory.

NYMEX May RBOB futures settled down $0.0106 at $2.71 gallon.

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