May WTI Slips at Expiry, RBOB Falls to 6wks Low Intraday


   
   CRANBURY, N.J. (DTN) -- Oil futures nearest delivery on the New York 
Mercantile Exchange and Brent on the Intercontinental Exchange settled Monday's 
session mixed, with the May West Texas Intermediate contract expiring at a 
$0.95 bbl premium to the June contract at $82.85 bbl.

   ICE June Brent futures eased $0.29 with a $87 bbl settlement, reversing 
overnight losses after testing support at the $85.61 50-day moving average. 
Brent futures dropped back from a $92.18 bbl six-month high reached earlier in 
April bolstered by an expanding geopolitical risk premium in the international 
crude benchmark as Israel and Iran appeared poised for a direct military 
conflict. Tensions have been dialed back by both countries' leadership, easing 
the risk premium.

   U.S. commercial crude inventory at a 459.993 million bbl 10-month high as of 
April 12 moved above the three-year average for the first time in 2024, data 
from the Energy Information Administration shows. Commercial stock levels 
increased 14.951 million bbl or 3.4% during the four-week period ended April 
12, easing supply tightness.

   The U.S. dollar softened, settling at a 105.913 three-day low in index 
trading against a basket of currencies, but holds near a 106.325 6-1/2 month 
intrasession high traded on April 16. The strength in the U.S. dollar, 
historically a drag for crude oil prices, is realized as expectations for 
interest rate cuts are pushed into the future. According to the CME FedWatch 
Tool, most investors do not expect a cut in the federal funds rate until the 
Federal Open Market Committee's September meeting, skipping past meetings in 
May, June, and July. And only a thin majority, 51.3%, expect two 25-basis point 
reductions in the key overnight bank borrowing rate, now in a 5.25% by 5.5% 
target range, in 2024.

   An unexpectedly strong U.S. economy and resilient labor market have stoked 
inflation pressure, which is seen holding borrowing costs higher for longer. 
The Bureau of Economic Analysis on Thursday will release their advanced reading 
for first quarter U.S. gross domestic product growth, with expectations eyeing 
a 2.3% annualized expansion rate. While a slowdown from the 3.4% growth rate 
registered in the fourth quarter 2023, the anticipated growth rate defies 
expectations in 2023 that the U.S. economy would slow down at a quicker pace 
this year due to higher interest rates. The Atlanta Federal Reserve Bank's 
GDPNow indicator expects a first quarter annualized GDP growth rate of 2.9%.

   Economic growth lends support for diesel fuel demand, with the May ULSD 
futures contract settling Monday's session up $0.0191 at $2.5604 gallon, albeit 
reversing higher from a $2.5039 19-week low on the spot continuous chart. High 
interest rates have slowed home buying, which cuts into construction jobs, 
manufacturing activity has remained subdued, while freight hauling is stuck in 
a prolonged recession.

   NYMEX May RBOB futures settled lower for a fourth consecutive session 
Monday, down $0.0249 at $2.6854 gallon, paring an intrasession decline to a 
$2.6649 gallon nearly six-week low on the spot continuous chart. The most 
recent Commitment of Traders report from the Commodity Futures Trading 
Commission released Friday afternoon shows speculators and money managers have 
reduced sizable long positions in the gasoline contract halfway through April. 
Weak demand compared with a year ago, down 168,000 bpd or 1.9% at 8.806 million 
bpd during the four weeks ended April 12 according to EIA data, and a break 
below trendline support sustained the selling pressure on Monday.

    

    

   Brian L. Milne, 1.732.768.0260, brian.milne@dtn.com, www.dtn.com.




(c) Copyright 2024 DTN, LLC. All rights reserved.