Oil prices fell in early trading on Wednesday as concerns about global demand due to weak economic momentum in China and fading hopes for a near-term U.S. interest rate cut outweighed supply concerns amid rising tensions in the Middle East.
Brent crude futures for June delivery fell 7 cents, or 0.1 percent, to $89.16 a barrel by 0042 GMT, while U.S. crude futures for May delivery fell 10 cents, or 0.1 percent, to $85.26 a barrel.
Oil prices have fallen since the start of the week as unfavorable economic conditions weighed on investor sentiment, limiting gains from geopolitical tensions amid anticipation of how Israel will respond to the attack launched by Iran on it earlier in the week.
Concerns about demand have been heightened by expectations that U.S. interest rate cuts will likely be delayed and weaker-than-expected Chinese economic data, said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities.
He added that since the market had risen until last week on supply concerns amid rising tensions in the Middle East, the relatively limited Iranian aggression did not provide a basis for buying.
US West Texas Intermediate crude is expected to trade in a range between $83 and $88 without any new developments.
Federal Reserve Chairman Jerome Powell said a string of disappointing data showing stronger-than-expected inflation meant the Fed would likely take longer than previously thought to become confident that inflation was on its way to 2 percent.
In China, the world's largest oil importer, the economy grew faster than expected in the first quarter, but a number of March indicators, such as property investment, retail sales and industrial production, showed that domestic demand remains weak, weighing on overall momentum.
In the Middle East, the Israeli War Cabinet postponed until today its third meeting regarding the decision to respond to the first direct attack launched by Iran on Israel ever, while Western allies seek to impose new sanctions quickly on Tehran in order to dissuade Israel from a major escalation in the Middle East.
However, analysts ruled out that the unprecedented Iranian missile and drone attack on Israel would lead to severe US sanctions on Iranian oil exports due to concerns about raising oil prices and angering China.
Meanwhile, market sources cited figures from the American Petroleum Institute on Tuesday as saying that U.S. crude oil inventories rose more than analysts polled by Reuters had expected last week, but gasoline and distillate stocks fell.
Official data from the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due out on Wednesday.
