DTN Oil

CRANBURY, N.J. (DTN) --- Oil futures nearest delivery on the New York Mercantile Exchange (NYMEX) and Brent crude on the Intercontinental Exchange fell Friday and registered steep losses on the week. The geopolitical risk premium in crude prices was erased while macroeconomic data showed a U.S. economic slowdown taking hold in April, undermining fuel demand.

An unexpected contraction in the U.S. service sector in April reported Friday by the Institute of Supply Management (ISM) accelerated losses in RBOB futures and weakness in the U.S. dollar. The dollar came under pressure earlier in the session from an unexpected uptick in the national unemployment rate while job growth of 175,000 was less than expected. The gasoline contract was already under pressure from souring consumer confidence reported Tuesday by The Conference Board, with consumers surveyed stating their intention to cut back on discretionary spending, including dining out and vacations. Underlying consumer concerns were inflation and an increasing belief for interest rates to remain high over the next year.

These economic indicators bode poorly for driving demand, while the consumption pattern for gasoline is under pressure from increasing fuel economy efficiencies for the national fleet. June RBOB futures settled at a $ 2.5551-gallon eight-week low on the spot continuation chart, down $0.0414 on the session and $0.2095 or 7.6% on the week.

June ULSD futures settled Friday's session flat at $2.4434 gallon, holding above Thursday's $2.4219 10-month low on a spot continuous basis, while down $0.1048 or 4.1% on the week. ULSD has trended lower since early April, fully retracing a first-quarter uptrend on weak demand. ISM on Wednesday reported manufacturing activity moved back into contraction in April after a short-lived recovery in March, while freight movement remains in recession.

July Brent futures settled Friday's session $0.71 lower at $82.93 a barrel (bbl), and erased $6.54 or 7.3% of value this week, as concerns over a direct military conflict between Israel and Iran dissipated, erasing a buildup in the geopolitical risk premium.

Building commercial crude inventory, up 15.9 million bbl or 3.6% from mid-March through April 26, according to data from the Energy Information Administration, also weighed on the U.S. crude benchmark. June West Texas Intermediate futures fell $0.84 Friday and $5.74 or 6.8% on the week to a $78.11 bbl settlement, with a 7.265 million bbl build reported Wednesday for the final week of April punctuating the growth in domestic supply.

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