The oil complex settled higher Tuesday, boosted by a weaker dollar after economic data released by the Commerce Department pointed to softening US growth, making the odds of a Federal Reserve interest rate hike this week less likely.
June NYMEX crude settled $1.40 higher at $44.04/b, while June ICE Brent also received a boost, rising $1.26 to settle at $45.74/b. Refined products rounded out a positive day for the complex, with May NYMEX RBOB settling 5.29 cents higher at $1.5660/gal and prompt NYMEX ULSD up 4.22 cents at $1.3325/gal.
Data released by the Commerce Department showed that US sales of durable goods, which are expensive capital goods with a useful life of over three years, fell short of expectations, posting an increase of 0.8%.
While the durable goods data often vacillates, the data likely undershot most analysts' expectations, according to Dennis Gartman, publisher of the Gartman Letter.
"Last month ... durables were down 2.8% month on month, so obviously they are expected to be up this month with the consensus calling for an increase of 1.5% or so," he wrote prior to the release of the data. "However, the range of guesstimates on the Street is uncommonly wide, with the pessimists looking for zero growth while the optimists think that orders rose 3.5%."
While the data may paint a gloomy outlook for the US economy, the market seemed to focus on the immediate fall in the US Dollar Index, which fell as low as 94.205 early in the day before trading at 94.493 at 2:45 pm EDT (1845 GMT), down 0.249 point.
"The petroleum markets are trading higher to maintain their recent trading range on Tuesday, supported by a weaker US dollar," said Tim Evans, energy futures specialist at Citi. "The dollar, in turn, is being weighed down by today's soft durable goods orders and weak consumer sentiment report, as well as expectations that this week's FOMC meeting will likely leave interest rates unchanged."
In addition to a stronger dollar, the oil complex also likely received a boost from recent data showing robust gasoline demand in the US, while analysts surveyed by Platts Monday expected domestic stocks to decline by 1.3 million barrels.
US drivers traveled 5.6% more miles in February than in February 2015, marking the 24th consecutive month of increases, a streak not seen since 2005, US Federal Highway Administration data released Monday showed.
The four-week moving average of total US gasoline supplied, a statistic that some analysts use to derive implied demand, fell marginally to 9.39 million b/d in the week ended April 15 but set an all-time record for the reporting week, US Energy Information Administration data showed Friday.
While the oil complex was buoyant in Tuesday trading, analysts expressed caution related to persistent oversupply concerns.
An overhang of Forties at the prompt -- with 6.4 million barrels floating on vessels in the North Sea and UK-Continent -- contrasted with perceptions of a tighter balance in June when fields that feed into the Ekofisk grade, the second largest of the BFOE grades, will undergo maintenance.
As a result, prompt Dated Brent-related financial instruments have diverged from strengthened front-month ICE Brent futures.
Brent CFDs -- weekly hedging instruments which settle against the difference between assessments by Platts of Dated Brent over the reference week and assessments by Platts of cash BFOE over the week -- softened in recent trading sessions despite the rise in the futures market.
Meanwhile, Evans pointed to more oversupply concerns across the globe.
"But while short-term price movements may be driven by financial demand related to a weaker dollar, we continue to see a physical market that remains very well supplied," he said. "Saudi Arabia is reportedly making spot sales to a teapot refiner in China as a more aggressive competitive move than has been typical. And Iranian floating inventories seem to be edging higher rather than being drawn down."
