DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures nearest to delivery on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange moved lower on Monday as traders look ahead to Friday's report on job creation in the United States for April which is expected to show a resilient U.S. labor market, adding to inflation concerns.

Market consensus calls for job growth of 230,000 for this month when the Bureau of Labor Statistics releases its Employment Situation summary on May 3, which while slower than March's 303,000 increase in new jobs, remains robust. Through the 12 months ending in February, monthly job gains averaged 231,000. A strong labor market also indicates a growing economy, with those two features seen keeping inflation above the Federal Reserve's 2% target, delaying a cut in interest rates.

Atlanta Federal Reserve Bank's GDPNow indicator calls for the U.S. economy to grow by an annualized 3.9% in the second quarter, well above the 1.6% growth rate for the first quarter reported on April 25 by the Bureau of Economic Analysis (BEA). The reading was well below expectations while inflation for the first quarter outpaced projections, with the personal consumption expenditures price index clocking in with a 3.4% increase, up from 1.8% for the fourth quarter 2023.

The Atlanta Fed's GDPNow tool indicated first quarter GDP at 2.7%, 1.1% above the BEA's advanced estimate.

Currently, in a 5.25% by 5.5% target range, there is a 2.7% probability the Federal Open Market Committee (FOMC) will lower the policy rate 25 basis points when it meets Tuesday and Wednesday, according to the CME FedWatch Tool. FOMC is now projected to cut the federal funds rate once in 2024, down from expectations of as many as six cuts at the beginning of the year. A modest 25 basis point reduction in the key overnight borrowing rate is expected at FOMC's September meeting.

Consumer spending on services continues to drive both the economy and workforce gains, with spending on goods declining during the first quarter, according to BEA. For March, BLS reports 192,000 new jobs or 63% of the job creation was in healthcare, government, and leisure and hospitality. Manufacturing had little to no change in employment.

Weakness in goods has weighed on manufacturing activity and freight moved by truck, key demand centers for distillate fuel. Distillate fuel supplied to the U.S. market was down 11.6% during the four weeks ended April 19 against the comparable year-ago period, data from the Energy Information Administration shows.

At Monday's settlement, NYMEX May ULSD futures fell $0.0169 to $2.5313 gallon ahead of expiration Tuesday afternoon, with the prompt spread in a $0.0147 contango.

NYMEX May RBOB futures reversed lower after again testing retracement resistance, settling down $0.0159 at $2.7487 gallon ahead of expiration at Tuesday's close. The backwardation in the prompt spread narrowed modestly to $0.0178 per gallon.

NYMEX June West Texas Intermediate futures settled $1.22 lower at $82.63 bbl. ICE June Brent settled down $1.10 at $88.40 barrels (bbl) ahead of Tuesday's contract expiration, ending at a $1.20 premium to the July contract.

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