Oil prices pare losses after weak PPI; surprise build in US inventories weighs

Investing.com-- Oil prices fell Thursday, weighed by demand concerns after a surprise build in U.S. crude inventories, although losses have been limited by signs of cooling U.S. inflation.

At 08:50 ET (12:50 GMT), Brent oil futures fell 0.4% to $82.27 a barrel, while West Texas Intermediate crude futures fell 0.5% to $78.09 a barrel.

Weak PPI data helps

Data released earlier Thursday showed that U.S. producer prices unexpectedly fell in May, with the producer price index dropping 0.2% last month after advancing by an unrevised 0.5% in April.

In the 12 months through May, the PPI increased 2.2% after rising 2.3% in April.

This followed data, released on Wednesday, showing consumer prices unchanged in May for the first time in nearly two years.

The U.S. Federal Reserve kept its benchmark overnight interest rate in the current 5.25%-5.50% range on Wednesday, with Fed officials cutting predictions of the number of cuts of 25 basis points likleu this year to one, from three in March, citing sticky inflation.

A cut in interest rates would likely stimulate economic activity in the U.S., boosting demand for crude in the world's biggest consumer.

US inventories rise, IEA forecasts supply glut

Sentiment in the oil markets had been hit after government data showed on Wednesday showed that U.S. oil inventories unexpectedly grew in the first week of June - by 3.7 million barrels, against expectations for a draw of 1.2 million barrels.

Outsized builds in distillates and gasoline stockpiles also drove up concerns that fuel demand was not picking up with the summer season as expected.

The build in inventories came as a monthly report from the International Energy Agency showed the agency slightly trimming its outlook for demand growth in 2024 by 100,000 barrels per day to 960,000 bpd.

The IEA also warned that it expected global oil demand to peak by 2029, and that it would then begin contracting in the following years. Increased supply from the U.S. and other regions outside the Organization of the Petroleum Exporting Countries was also expected to create a supply glut eventually.

The IEA’s forecast contrasted with that of the OPEC, which in a monthly report earlier this week maintained its demand forecast for the year.

The OPEC had also assured markets that any plans to increase production would be largely dependent on oil prices, after initial plans to begin scaling back supply cuts this year were received negatively by markets.

(Ambar Warrick contributed to this article.)

This article first appeared in Investing.com