DTN Oil

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange shrugged off early weakness spurred by a surprise reading for U.S. economic growth to end Thursday's session higher. Brent widened its premium to West Texas Intermediate (WTI) to a $5.44 per barrel (bbl) three-month high.

June Brent pushed above the $88.99 20-day moving average with a $89.01 bbl settlement, up $0.99, with three trading days remaining before expiration. The international crude benchmark gained on the U.S. benchmark as sluggish demand for finished fuels in the United States aligned with slower-than-expected economic growth while geopolitical tensions underpin Brent.

June WTI futures settled $0.76 higher at $83.57 bbl, gaining in market-on-close trade. The U.S. dollar weakened 0.2% to a 105.451 two-week low in index trading, pressured by a steep slowdown in first-quarter U.S. economic growth. The Bureau of Economic Analysis (BEA) Thursday morning reported a 1.6% annualized growth rate by the U.S. economy for the first three months of 2024, well below expectations for a 2.3% expansion rate, and a steep fall-off from growth of 3.4% during the fourth quarter 2023.

Compounding the economic slowdown, costs grew, with BEA reporting the personal consumption expenditures price index increased 3.4% in the first quarter from a 1.8% gain during the final three months of 2023. Consumer spending on services helped drive GDP higher in the first quarter, which offset a decline in consumer spending on goods. Wage gains by state and local government employees also boosted first-quarter GDP, adding inflationary pressure.

Investors now expect one 25-basis point rate cut in 2024, down from two on Wednesday, with a 59.2% probability the Federal Open Market Committee will reduce the federal funds rate in September, according to the CME FedWatch Tool. The overnight bank borrowing rate is currently in a 5.25% by 5.5% target range.

Weak distillate fuel demand in 2024, trailing the year-ago pace by 164,000 barrels per day or 4.3% through April 19, according to data from the Energy Information Administration foreshadowed the slowdown in U.S. economic growth. A prolonged recession in freight shipments and weak industrial output have weighed on both the U.S. economy and distillate fuel supplied to the U.S. market. On Thursday, the Federal Reserve Bank of Kansas City said manufacturing activity fell again in April, which follows a similar finding by the Richmond Federal Reserve Bank on Tuesday.

May ULSD futures, which moved into a contango market structure in mid-April, settled flat, up five points at $2.5504 per gallon. The ULSD crack spread ended Thursday's session at an 11-month low.

May RBOB futures gained $0.0239 with a $ 2.7582-gallon settlement, ending above the $2.7542 20-day moving average, with Memorial Day weekend four weeks away.

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