DTN Oil

CRANBURY, N.J. (DTN) -- New York Mercantile Exchange West Texas Intermediate futures and Brent on the Intercontinental Exchange edged lower Monday, ULSD firmed while the RBOB contract slumped, as inflationary pressure is seen blunting demand for gasoline despite the unofficial kickoff to the summer U.S. driving season this weekend.

A handful of Federal Reserve officials speaking Monday suggested recent data showing inflation slowed in April was not enough to sway their opinion to begin reducing interest rates at their June meeting. Atlanta Federal Reserve Bank President Raphael Bostic continues to believe the central bank might cut the federal funds rate only once in 2024, with the market currently eyeing two 25-basis point reductions in the policy rate this year.

April's Consumer Price Index for April released last week by the Bureau of Labor Statistics unexpectedly ticked down to a 3.4% annual increase, with BLS also reporting separately that real average hourly earnings declined. The Census Bureau said retail sales in April showed no growth, which followed weakening consumer sentiment and confidence in early May.

The Federal Open Market Committee is still expected to reduce the federal funds rate 25-basis points in September from a 5.25% to 5.5% target range and by another 25-basis points in December, according to CME's FedWatch Tool. A second cut in December on Monday had a probability of 54%, down from 57.3% on Friday, according to the tool.

After pushing up to a $2.5830 two-week high overnight, June RBOB futures settled $0.0343 lower at $2.5399 gallon, as consumer pessimism and a pullback in discretionary spending is deleterious for driving demand with no help soon in the form of easing interest rates. The falloff in the gasoline contract is realized despite AAA projecting a record 38.4 million Americans will travel by road over this weekend's Memorial Day holiday, up 4% from a year ago. Gasoline inventory in the United States on May 10 was 9.437 million bbl or 4.3% above year ago, data from the Energy Information Administration shows.

June ULSD futures notched its fourth straight advance, albeit settling Monday's session a fractional eight points higher at $2.4871 gallon, after holding above key trendline technical support last week. It was the first settlement above the 20-day moving average since April 10.

The weekend deaths of Iranian President Ebrahim Raisi and Foreign Minister Hossein Amirabdollahian had a negligible impact on the crude contracts on Monday, with both the international and U.S. benchmarks down $0.26 and $0.27 bbl, respectively. July Brent settled at $83.71 bbl, and June WTI futures at $79.80 bbl ahead of expiration Tuesday afternoon. July WTI settled at a $0.50 bbl discount to the expiring contract.

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