Oil prices were mostly stable on Thursday as the markets await U.S. crude oil stockpiles data, though resilient U.S. economic activity pointed to borrowing costs staying higher for longer in a potential blow to demand.
Brent futures dipped 4 cents or 0.05% to $83.56 a barrel at 0330 GMT, while U.S. West Texas Intermediate (WTI) crude eased 10 cents or 0.13% to $79.13.
“The broader risk-off environment has translated to some downward pressures on oil prices, which overrides the larger-than-expected drawdown in U.S. crude inventories from the recent API data,” said Yeap Jun Rong, market strategist at IG.
U.S. crude oil and gasoline inventories fell last week while distillates rose, according to market sources citing American Petroleum Institute figures on Wednesday.
The API figures showed crude stocks were down by 6.49 million barrels in the week ended May 24, the sources said, with gasoline inventories down by 452,000 barrels, and distillates up by 2.045 million barrels.
Analysts had projected U.S. energy firms would pull 1.9 million barrels of crude out of storage while stocking 0.4 million barrels of distillates and 1 million barrels of gasoline.
Data from the U.S. Energy Information Administration (EIA) is due later on Thursday.
Rising global oil inventories through April due to soft fuel demand may strengthen the case for OPEC+ producers, which include the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, to keep supply cuts in place when they meet on June 2, OPEC+ delegates and analysts say.
“A greater driver for oil prices ahead may revolve around the upcoming OPEC+ meeting this weekend, which could see OPEC members extending their current production cuts potentially till the end of the third quarter to support prices,” Yeap added.
Oil markets have been under pressure over expectations the Federal Reserve will keep interest rates higher for longer, with Brent settling at its lowest in more than three months on May 23.
U.S. economic activity continued to expand from early April through mid-May but firms grew more pessimistic about the future while inflation increased at a modest pace, a Fed survey showed.
Higher borrowing costs tend to tie down funds and consumption, a negative for crude demand and prices. The Fed is now seen cutting rates in September at the earliest, compared to a June start that had been expected by markets at the beginning of the year.
(Reporting by Katya Golubkova in Tokyo and Jeslyn Lerh in Singapore; Editing by Shri Navaratnam and Edwina Gibbs)