DTN Oil

CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange settled higher on Wednesday after plumbing fresh and new multiweek lows in morning trade in reaction to macroeconomic data showing a slowdown in the U.S. economy in April.

The Bureau of Labor Statistics (BLS) on Wednesday morning reported a downtick in the Consumer Price Index in kicking off the second quarter, which increased 0.3% month-on-month and 3.4% annually in April which was in line with market expectations. BLS also reported real average hourly earnings for all employees eased 0.2% in April, signaling wage inflation slowed last month.

The inflation data strengthened the likelihood of two 25-basis point reductions in the federal funds rate from the current 5.25% to 5.5% target range later this year. CME FedWatch Tool identifies September and December as the likely timing for the Federal Open Market Committee to reduce their policy rate.

The inflation reading was buttressed by retail sales data which was flat with March in April according to the U.S. Census Bureau. The slowdown in consumer spending was identified by a survey by The Conference Board in April showing consumers planned to reduce discretionary spending and hold off on buying big-ticket items, such as appliances, in response to concern over inflation and high interest rates.

For the goods sector of the U.S. economy, the Federal Reserve Bank of New York released its Empire State Manufacturing Survey showing manufacturing activity in New York remained in recession. On Tuesday, the shipping component of Cass Freight Index by freight invoice provider Cass Information Systems Inc. declined in April, with the U.S. freight market remaining mired in a two-year downtrend.

Data from the Energy Information Administration (EIA) released Wednesday morning corroborates the weakness in consumer spending and commercial activity, with gasoline supplied to the U.S. market during the four weeks ended May 10 down 407,000 barrels per day (bpd) or 4.5% against the comparable year-ago period. Distillate fuel supplied to the U.S. market during the same period is down 206,000 bpd or 5.3% year-on-year.

Across-the-board drawdowns from commercial crude, gasoline and distillate fuel, with the decline in distillates of a modest 45,000 barrels (bbl), reported by EIA lent tepid support for oil futures after the contracts tested key technical support points.

June ULSD futures edged up a fractional $0.0031 with a $ 2.4231-gallon settlement, reversing off a fresh 10-1/2 month low on a spot continuous basis at $2.3764 gallon in front of key support at the $2.3647 trendline for the downtrend from the April 2022 high.

June RBOB futures rallied $0.0372 with a $ 2.4968-gallon settlement a little more than a week ahead of the Memorial Day weekend after testing support at the $2.4439 200-day moving average with a $2.4427 fresh 11-week low on a spot continuous basis. AAA projects record road travel over the holiday weekend, frequently referred to as the unofficial kickoff to the summer driving season.

June West Texas Intermediate futures settled $0.61 higher at $78.63 bbl, reversing off a $76.70 bbl 11-week low on the spot continuous chart after finding support at the $76.04 trendline for the downtrend from the March 2022 high.

July Brent futures gained $0.37 in the session with a $82.75 bbl settlement, reversing off an 11-week low on the spot continuous chart of $81.05 bbl. Key support for the international crude benchmark is marked at the $79.45 200-day moving average on the weekly chart.

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