Crude Benchmarks at 24-Week Highs on Expanded Global Risk

Brian L Milne
By  Brian L. Milne , DTN Refined Fuels Editor

CRANBURY, N.J. (DTN) -- The U.S. and international crude benchmarks settled Friday's session at 24-week highs as the risk to global security heightened this week with a high-profile killing of an Iranian general. The ULSD contract ended at a three-week high on a bullish U.S. employment report highlighting strong economic growth.

June Brent futures on the Intercontinental Exchange advanced $0.52 to a $91.17 per barrel (bbl) settlement Friday, trading as high as $91.91 bbl as Israel prepared for a possible retaliatory strike by Iran after a missile strike on Monday killed General Mohammad Reza Zahedi, the commander of the Islamic Revolutionary Guard Corps. Analysts said hostilities between Israel and Iran came out of the shadows this week and could lead to direct confrontation. Tehran has so far used proxies in attacking Israel, seeking to avoid an attack by Israel or luring the U.S. into a conflict.

New York Mercantile Exchange (NYMEX) May West Texas Intermediate (WTI) futures settled up $0.32 at $86.91 bbl Friday, with the U.S. crude benchmark paring an advance to $87.63 bbl.

NYMEX May ULSD futures gained $0.0317 on the session with a $2.7730 gallon nearly three-week high settlement on the spot continuous chart. ULSD has now advanced for six consecutive sessions after testing key trendline support in late March with the contract under pressure from weak demand amid a prolonged contraction in freight hauling and manufacturing activity. The Institute of Supply Management on Monday released its manufacturing Index for March showing factory activity grew for the first time since September 2022.

Continued strength in the U.S. labor force bodes well for the economy with the Bureau of Labor Statistics Friday morning reporting job growth of 303,000 in March, far outpacing expectations. Job growth in construction, with 39,000 new positions reported, outpaced the 19,000 average over the previous 12 months. Construction is an important driver of diesel demand.

While bullish for the economy, with the Federal Reserve Bank of Atlanta's GDPNow indicator calling for first-quarter gross domestic product growth of 2.5% before Friday's employment report, wage growth again expanded -- up 4.1% year-on-year in March. A growing labor force and higher wages add to inflation that is seen pushing back the start of a rate-cutting cycle by the Federal Reserve that was seen beginning in June. CME's FedWatch Tool shows a 50.9% probability that the Federal Open Market Committee will maintain the federal funds rate in its current 5.25% by 5.5% target range at its June 12 meeting, up from 34.2% on Thursday.

Consumer spending could be restrained as inflation appears to be sticky while interest rates stay higher for longer, potentially slowing driving demand. NYMEX May RBOB futures eased $0.0056 from a seven-month high settlement on a spot continuous basis to $2.7886 gallon.

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

Brian Milne