Oil Futures Advance after Testing Support, USD Weakness


   
   CRANBURY, N.J. (DTN) -- New York Mercantile Exchange oil futures nearest to 
delivery and Brent crude on the Intercontinental Exchange registered gains 
Tuesday afternoon amid a technical bounce and a weaker U.S. dollar, as a 
sluggish start to the second quarter by the U.S. economy improved the outlook 
for interest rate cuts later this year.

   S&P Global Flash US Composite PMI released Tuesday morning showed a 
1.2-point decline to a 50.9 four-month low in April, with manufacturing 
slipping below 50 to 49.9, indicating no growth, while activity for the service 
sector fell to a five-month low 50.9.

   "The US economic upturn lost momentum at the start of the second quarter, 
with the flash PMI survey respondents reporting below-trend business activity 
growth in April," said Chris Williamson, chief business economist at S&P Global 
Market Intelligence. "The more challenging business environment prompted 
companies to cut payroll numbers at a rate not seen since the global financial 
crisis if the early pandemic lockdown months are excluded."

   The U.S. dollar fell 0.4% to a 105.510 eight-session low in index trading 
against a basket of currencies, pressured by the PMI report. West Texas 
Intermediate futures moved in the opposite direction of the dollar, advancing 
as the dollar weakened.

   The economic slowdown highlighted by the PMI data increased the probability 
for two 25-basis point cuts in the federal funds rate in 2024 from 51.1% on 
Monday to 58.8% Tuesday, according to the CME FedWatch Tool.

   The Federal Open Market Committee will discuss monetary policy next week, 
but there is near universal agreement that central bank officials will leave 
the federal funds rate unchanged in its current 5.25% by 5.5% target range. The 
market still anticipates the first 25-basis point rate cut to occur during the 
FOMC's September meeting, although the odds for a rate cut in July improved.

   NYMEX June WTI settled $1.46 higher at $83.36 bbl, reversing higher after 
testing support at the $81.23 50-day moving average. ICE June Brent gained 
$1.42 with a $88.42 bbl settlement. NYMEX May ULSD futures settled $0.0188 
higher at $2.5792 gallon, continuing an advance from Monday's $2.5039 19-week 
low on the spot continuous chart. NYMEX May RBOB futures posted a $0.0368 gain 
with a $2.7253 gallon settlement after four straight down sessions, reversing 
higher after finding retracement support following the March uptrend.

    

    

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




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