Oil prices fell, paring monthly gains, after U.S. crude inventories expanded again and as traders prepared to parse U.S. data that will help shape the outlook for monetary policy.
Brent crude fell to around $83 a barrel on Thursday after settling little changed, while West Texas Intermediate crude fell near $78. U.S. national inventories rose for a fifth straight week, although the 4.2 million-barrel build was less than an industry report had forecast. Crude stockpiles at the U.S. Cushing hub also rose.
The Fed’s preferred inflation gauge — the core personal consumption expenditures index — is due out later Thursday. It follows a series of comments from central bank officials who have said in recent weeks that they are in no rush to start cutting interest rates. Their decision will affect the dollar, the value of commodities and broader energy demand conditions.
Crude oil is set for a second monthly gain, although prices remain in tight trading ranges, with bid-ask spreads limited.
The advance was supported by supply cuts from OPEC and its allies, and the group is widely expected to agree to extend the cuts into the second quarter. However, concerns about the demand outlook remain, with consumption growth in China likely to slow due to a weak economy.
At present, positive signals continue in the oil market, with the spreads between the nearest two oil contracts widening in backwardation, indicating a rise in prices, with spot prices remaining higher than longer-term contracts.
“The market is feeling relatively tight,” said Saad Rahim, chief economist at Trafigura Group, citing signs of life in global manufacturing and petrochemicals. “You’re hearing the phrase ‘upside risks’ a lot more than you’ve heard in the last couple of years.”
