By Yuka Obayashi
TOKYO (Reuters) – Oil prices fell in early trading on Thursday, as concerns about a potential slowdown in the U.S. economy amid late interest rate cuts outweighed worries about the risk of extension of the conflict in the Middle East.
Brent crude futures fell 9 cents, or 0.1 percent, to $86.95 a barrel by 0024 GMT, and U.S. West Texas Intermediate crude futures slipped 7 cents, or 0.1%, to 82.74 dollars per barrel. Both benchmarks lost less than 1% on Wednesday.
“Tensions between Iran and Israel have eased, but Israeli attacks on Gaza are expected to worsen and the risk of conflict spreading to neighboring countries is supporting oil prices,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.
“On the other hand, a late cut in US interest rates has been a source of concern for the US economy and crude oil demand, which is weighing on the oil market,” he said .
Israeli military planes pounded the northern Gaza Strip for a second day on Wednesday in a ferocious assault that shattered weeks of relative calm. Israel also said it was moving forward with plans for a general assault on Rafah in the south.
Meanwhile, U.S. business activity slowed in April to a four-month low, with S&P Global reporting on Tuesday that its composite production PMI, which tracks the manufacturing and services sectors, had fallen to 50.9 this month, from 52.1 in March.
The US Federal Reserve was spooked by a series of stronger-than-expected inflation and employment figures, suggesting the fight to bring inflation back to the central bank’s 2% target rate has stalled or was reversed.
Data on U.S. gross domestic product and personal consumption expenditures for March later this week will be crucial for the dollar and any attempt to gauge the movement in U.S. rates.
Data from the Energy Information Administration (EIA) released Wednesday showed that U.S. crude oil inventories fell unexpectedly last week as exports jumped, while gasoline stocks fell less than expected. [EIA/S]
Crude inventories fell 6.4 million barrels to 453.6 million barrels in the week ended April 19, the EIA said, while the Reuters survey forecast a rise of 825,000 barrels.
“The data provided a temporary boost to oil prices, but it didn’t seem to last long,” Fujitomi’s Tazawa said.
(Reporting by Yuka Obayashi; editing by Tom Hogue)
