DTN Oil Update

Oil Futures Fell Easing Strong Gains

HOUSTON (DTN) -- Oil futures settled lower on Thursday after reaching five-month highs the previous trading session, despite expectations of supply tightness due to low U.S. crude inventories and tougher sanctions on Russian oil trade.

The front-month NYMEX WTI futures contract dropped by $1.43 to $78.61 bbl, below the $80 mark reached in the previous trading session. The March ICE Brent futures contract dropped by $0.77 to $81.26 bbl, broadening the spread between both crude benchmarks to $2.65.

The February RBOB futures contract edged down by $0.0409 to 2.1180 gallon. The front-month ULSD futures contract inched up by $0.0010 to $2.6145 per gallon.

Higher-than-expected initial unemployment claims in January contributed to setting a bearish tone in crude oil and gasoline futures contracts, while the ULSD futures contract for February shipments continued its upward trend.

The Department of Labor reported that the advance figure for seasonally adjusted initial claims was 217,000, an increase of 14,000 from the 203,000 revised level from the previous week. The figure surpassed the market expectation of 201,000.

Meanwhile, retail sales rose 0.4% in December compared to November, according to data released today by the Census. December's retail sales fell short of market expectations, which anticipated a 0.5% rise.

After Israel and Hamas announced a ceasefire deal Jan. 15 ending the 15-month war, the market is focusing on expectations of firm global oil demand and supply tightness derived from stricter U.S. sanctions on crude oil and fuel trade from Russia, Iran and Venezuela.

A drop in U.S. crude inventories, reported by the Energy Information Administration and the American Petroleum Institute for the week ended January 10, is expected to support higher oil futures prices in the near term.

The U.S. dollar index dropped by 0.11% to 108.81 against a basket of foreign currencies.

Maria Eugenia Garcia can be reached at Maria.Garcia@dtn.com