DTN Oil

CRANBURY, N.J. (DTN) -- Nearest delivered oil futures on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange extended Tuesday's losses into May, pressured by ongoing concerns over demand as consumers worry about inflation and high-interest rates, potentially denting discretionary spending and purchases of big-ticket appliances.

The U.S. dollar rallied to a 106.380 seven-month high overnight ahead of the afternoon monetary policy announcement by the Federal Open Market Committee (FOMC), with no change to the federal funds rate expected until September. The Federal Reserve's preferred inflation indicator, the Bureau of Economic Analysis' Personal Consumption Expenditures price index, increased 2.7% during the 12 months that ended in March, up from 2.5% in January and February. That's well ahead of the Fed's 2% inflation target.

Data released Tuesday by the Bureau of Labor Statistics (BLS) offered more evidence that inflationary pressure continues, reporting wages increased 4.4% during the year ended in April. BLS will publish its Nonfarm Employment Situation report Friday morning, with the market expecting robust job growth of 230,000 in April. While that would be a slowdown from March's 303,000 new jobs, the estimate is in line with the monthly average for the year ending in February of 231,000 job gains per month.

The Institute of Supply Management is expected Wednesday morning to show manufacturing activity in April stalled. Weak factory activity along with a recession in freight movement has crimped demand for diesel, with Energy Information Administration (EIA) reporting distillate fuel supplied to the U.S. market during the four weeks through April 19 down 11.6% against the comparable year-ago period.

EIA will update figures through April 26 at 9:30 a.m. CDT, with the American Petroleum Institute late Tuesday reporting a build in commercial crude oil inventory and draws in product stock levels.

Shortly after 7 a.m., June West Texas Intermediate was down about $1.50 at $80.40 barrel (bbl), a five-week low. Brent's front-month contract is now for July delivery, which gapped down on the spot continuous chart to trade at a seven-week low, falling $1.30 to $85 bbl.

June ULSD futures fell $0.0235 to $2.5040 gallon, holding above Tuesday's $2.4746 10-month intraday low on the spot continuous chart. June RBOB futures declined to a $2.6435 seven-week low on a spot continuous basis overnight in its debut as the front month contract, down $0.0319 at $2.6595 shortly after 7 a.m. CDT.

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