Oil Down after Rallying on US Crude Draw, Rate Cut Hopes


   
   VIENNA (DTN) -- Oil futures closest to expiration on the New York Mercantile 
Exchange and Brent crude on the Intercontinental Exchange shed some of 
Tuesday's gains Wednesday morning, after rallying some $2.50 bbl Tuesday 
afternoon following the release of U.S. macroeconomic data disappointing to the 
downside, raising odds of an interest rate cut.

   S&P Global's preliminary composite U.S. Purchasing Manager Index for April 
at 50.9 came in a full point lower than expected, and the manufacturing sector 
saw no growth at all, with the manufacturing PMI reverting below 50 to 49.9. 
This took the market by surprise given the sector's performance in the first 
quarter and raised hopes of more interest rate cuts this year. Expectations 
around the Federal Reserve embarking on a rate cutting cycle have been pushed 
back repeatedly so far this year as inflation continues to prove sticky and the 
labor market remains tight. Data on U.S. durable goods orders in March, set to 
provide more insight on the sector's health, will be released by the Census 
Bureau at 8:30 AM ET.

   Another piece of bullish news came in the form of the American Petroleum 
Institute unexpectedly reporting a sizable draw to U.S. crude oil inventories. 
The API reported domestic crude oil stocks dropped 3.23 million bbl in the week 
ending April 19 versus an expected 500,000 bbl build. At the Cushing tank farm 
in Oklahoma, the NYMEX delivery point for West Texas Intermediate futures, 
inventories declined by 898,000 bbl.

   Reported oil product stocks, however, tempered the report's bullish effect, 
with the institute reporting a much smaller-than-expected draw to gasoline 
inventories and a surprise build in distillate fuel oil stocks.

   The Energy Information Administration's weekly inventory report is scheduled 
for 10:30 AM ET release.

   Near 7:00 AM ET, WTI futures for June delivery were down $0.58 to trade near 
$82.78 bbl, and Brent for June delivery fell $0.51 to $87.91 bbl. RBOB for May 
delivery slid $0.0054 to $2.7199 gallon, while ULSD for May delivery dropped to 
$2.5571 gallon, down $0.0221.

    

    

   Karim Bastati, karim.bastati@dtn.com, www.dtn.com




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