Oil Prices Scale Back As Attention Shifts To US Demand Softness

Oil prices edged lower in early trading on Thursday after weak U.S. economic data raised concerns over the crude demand in the world’s largest economy.

Benchmark Brent crude prices edged lower 0.2% to $67.37 per barrel, while U.S. West Texas Intermediate prices fell 17 cents to $63.50 per barrel at 3.56 a.m. ET. Retail sentiment on Stocktwits about the United States Oil Fund (USO) was in the ‘neutral’ territory at the time of writing.

Both futures contracts gained over 1% on Wednesday, as traders priced in geopolitical risks after Poland shot down Russian drones on its own territory and Israel struck inside Qatar in an attempt to kill Hamas leadership.

However, official U.S. data showed that the producer price index, a gauge of prices that producers receive for their goods and services in the open market, edged lower by 0.1% in August, after rising 0.9% in July. The tepid data implied a weakening of domestic demand, days after the Bureau of Labor Statistics significantly revised U.S. jobs data.

According to a Reuters News report, IG analyst Tony Sycamore, oil prices turned red as profit taking intensified after a three-day rally and an uptick in U.S. inventories, which raised concerns about demand in the world’s top oil consumer after a strong summer driving season.

Investors' attention now shifts to the U.S. consumer inflation data, due later on Thursday. The U.S. central bank will likely factor it in ahead of the monetary policymaker’s meeting next week, where the Fed is widely expected to deliver a 25-basis-point cut.

“Unless we see a major inflation undershoot today, speculation on a 50 bp move next week should remain contained,” ING Commodities analysts said in a note.

Oil markets have also come under pressure this week due to another output hike by OPEC+ which has already brought back 2.2 million barrels per day of production, this year.

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