NEW YORK: Oil prices fell on Thursday for the fourth session in a row, as the prospect of higher-for-longer U.S. interest rates raised worries around demand growth in the world's biggest oil market.
Brent crude oil futures were down 45 cents, or 0.6 percent, at $81.45 a barrel by 1550 GMT. US West Texas Intermediate (WTI) crude futures were 57 cents, or 0.7 percent, lower at $77 a barrel.
S&P Global data showed accelerating US business activity this month, but manufacturers also reported a surge in prices for a range of inputs, suggesting a pickup in goods inflation in the months ahead.
On Wednesday minutes from the U.S. Federal Reserve's latest policy meeting showed policymakers remain doubtful if current interest rates are high enough to tame stubborn inflation.High interest rates increase the cost of borrowing, which can slow down economic activity and dampen demand for oil.
Also weighing on the market, U.S. crude stocks rose by 1.8 million barrels last week, according to the Energy Information Administration, compared with an estimated draw of 2.5 million barrels.
However, the EIA also reported U.S. gasoline demand at its highest since November, providing some support for energy markets."It was a pretty good report for gasoline, everything pretty much hit the positive side of the ledger," Mizuho analyst Bob Yawger said. "However, one report does not make a trend, so everyone will be watching if it can continue to perform going forward."
Investors are also looking ahead to an upcoming June 1 meeting of the Organization of Petroleum Exporting Countries and its allies, together called OPEC+, where the group will decide its output policy. Russia said it exceeded its OPEC+ production quota in April for "technical reasons" and will soon present to the OPEC Secretariat its plan to compensate for the error, the Russian Energy Ministry said late on Wednesday.
GOLD
Gold fell to more than a week's low on Thursday, extending its decline for a third straight session, as investors grew apprehensive over U.S. rate cut timings and on strength in U.S. business activity.
Spot gold fell 1.8 percent to $2,336.39 per ounce, its lowest since May 13, as of 1748 GMT. U.S. gold futures settled 2.3% lower to $2,337.20 per ounce.The non-yielding bullion hit a record high of $2,449.89 on Monday and is up 14% so far this year.
Making gold less attractive, the dollar cut its losses for the day on U.S. business activity accelerating to the highest level in over two years in May, suggesting that economic growth picked up halfway through the second quarter.
Advancing dollar and a weakening U.S. rate cut outlook have catalyzed a round of profit-taking in gold, but the downside will be limited, said Daniel Ghali, commodity strategist at TD Securities.
While the policy response for now would "involve maintaining" interest rates at current levels, the latest Fed minutes reflected discussions of possible hikes.
"Investors that care about the Fed outlook actually aren't all that long in gold. They've missed the rally and in turn, don't have that much gold to sell. So while we do think the gold prices are staging a correction here, but that will be relatively shallow," Ghali said.
UBS raised its gold price forecasts to $2,600/oz for 2024-end and recommended to buy on dips at around $2,300/oz or below, citing a series of softer U.S. data for April, an upwardly revised central bank demand for gold and ongoing geopolitical uncertainties.
Meanwhile, imports to India, the world's second-biggest gold consumer, could fall by nearly a fifth in 2024 as high prices spur retail consumers to exchange old jewellery for new items, according to an industry body.
Spot silver fell 1. percent to $30.22. The recent rally in gold and copper prices drove it to $32.5, an 11-year high, earlier this week. Platinum was down 1.4 percent at $1,020.35, while palladium lost 3.5 percent to $964.75.