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Oil Prices Dip Amid Demand Concerns; U.S. Stockpiles Data Awaited

Oil prices eased on Thursday as robust U.S. economic activity suggested that borrowing costs might remain elevated for a longer period, potentially dampening demand. Investors are keenly awaiting the latest U.S. crude oil stockpiles data.

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As of 0630 GMT, Brent futures fell by 26 cents, or 0.3%, to $83.34 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped by 23 cents, or 0.3%, to $79.00 a barrel. Both benchmarks are on track for monthly losses, with Brent futures set to decline by over 5% from last month, and WTI poised for a drop of more than 3%.

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“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,” noted Yeap Jun Rong, a market strategist at IG.

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According to American Petroleum Institute (API) figures, U.S. crude oil and gasoline inventories fell last week, while distillates rose. Crude stocks were down by 6.49 million barrels for the week ending May 24, gasoline inventories decreased by 452,000 barrels, and distillates increased by 2.045 million barrels.

Analysts had anticipated a draw of 1.9 million barrels of crude, alongside increases of 0.4 million barrels of distillates and 1 million barrels of gasoline. Official data from the U.S. Energy Information Administration (EIA) is expected later on Thursday.

Rising global oil inventories in April, driven by weak fuel demand, may prompt OPEC+ producers—including the Organization of the Petroleum Exporting Countries (OPEC) and its allies like Russia—to maintain supply cuts at their upcoming meeting on June 2. OPEC+ delegates and analysts suggest that these cuts might be extended to support prices.

“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,” added Yeap.

Oil markets have faced pressure due to expectations that the Federal Reserve will maintain higher interest rates for an extended period. Brent settled at its lowest point in over three months on May 23.

A Federal Reserve survey indicated that U.S. economic activity expanded from early April through mid-May, though businesses grew more pessimistic about the future and inflation increased at a modest pace. Higher borrowing costs typically constrain funds and consumption, negatively impacting crude demand and prices. The earliest anticipated rate cuts by the Fed are now projected for September, a shift from the previously expected June start.

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