Oil prices fall on demand issues as markets await data on US crude inventories

By Katya Golubkova

TOKYO (Reuters) – Oil prices fell on Thursday as markets awaited the latest data on U.S. crude inventories, while resilient U.S. economic activity pointed to borrowing costs remaining higher for longer, in a potential blow to demand.

Brent futures lost 9 cents, or 0.1%, to $83.52 per barrel, while West Texas Intermediate (WIT) crude fell 3 cents, or 0.04%, to $79.19 at 00:46 GMT.

U.S. crude oil and gasoline inventories fell last week, while distillates rose, according to market sources citing data from the American Petroleum Institute on Wednesday.

API figures showed crude oil inventories fell by 6.49 million barrels in the week ended May 24, the sources said, with gasoline stocks falling by 452,000 barrels and distillates rising by 2.045 million barrels.

This goes against analysts’ projection that US energy companies will remove 1.9 million barrels of crude oil from storage while storing 0.4 million barrels of distillates and 1 million barrels of gasoline.

The US Energy Information Administration (EIA) date will be released later this Thursday.

“Any sign of strong demand in the EIA weekly inventory report should support crude oil prices,” ANZ Research said in a note.

Rising global oil inventories through April due to demand for light fuels could strengthen the case for OPEC+ producers, which include the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, to maintain supply cuts. in force when they meet on June 2, OPEC+ say delegates and analysts.

Oil markets have recently been under pressure due to expectations that the Federal Reserve will keep interest rates higher for longer.

U.S. economic activity continued to expand from early April through mid-May, but businesses became more pessimistic about the future while inflation rose at a modest pace, a Fed survey showed.

Higher borrowing costs tend to constrain funds and consumption, which is negative for crude oil demand and prices. The Fed is now expected to cut rates in September at the earliest, compared with the start of the easing cycle in June that markets expected at the start of the year.

(Reporting by Katya Golubkova; Editing by Shri Navaratnam)