Oil prices fall from multi-month highs on demand

By Robert Harvey

LONDON (Reuters) – Oil prices eased on Thursday, retreating from the previous session’s multi-month high, as investors took profits as demand warnings remained in focus despite a decline in U.S. inventories last week.

Brent crude futures were down 46 cents, or 0.53%, at $86.88 a barrel by 1235 GMT, while US West Texas Intermediate (WTI) crude futures fell 51 cents, or 0.61%, to $83.37 in trade weakened by the US Independence Day holiday.

In the previous session, Brent rose 1.3% to settle at $87.34, its highest close since April 30. WTI, meanwhile, settled at an 11-week high of $83.88.

Those gains followed a larger-than-expected decline in U.S. crude stocks. The US Energy Information Administration (EIA) reported a gain of 12.2 million barrels. Analysts polled by Reuters had expected a balance of 680,000 barrels.[EIA/S]

A weaker dollar and a brighter outlook for U.S. fuel demand after EIA data suggest Thursday’s price weakness may not last, PVM analyst Thomas Varga said.

OANDA analyst Kelvin Wong said Thursday morning’s drop in oil prices was partly due to traders taking profits after recent gains.

However, German industrial orders unexpectedly fell in May, adding to signs that recovery for Europe’s largest economy remains elusive.

First-time applications for U.S. jobless benefits surged last week, while demand worries were fueled by U.S. data showing that the jobless number rose at the same time.

Against that, weak economic data could accelerate interest rate cuts by the US Federal Reserve, which would support oil markets, analysts said.

Soft US data has already prompted markets to raise the probability of a September rate cut to 74% from 65%.

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Swiss bank UBS expects Brent crude oil to reach $90 a barrel this quarter, citing OPEC+ production cuts and a projected decline in oil inventories, Swiss bank UBS said in a note to clients.

(Reporting by Robert Harvey in London, Arunima Kumar in Bangalore, Katya Golubkova in Tokyo and Trixie Yap in Singapore Editing by David Goodman)

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