Oil prices rise after US economic data raises rate cut expectations

By Laila Kearney

NEW YORK (Reuters) -Oil futures rose on Thursday on a stabilizing U.S. job market and slower-than-expected inflation data, which increased expectations that the Federal Reserve would begin to cut interest rates in the fall.

Brent crude futures were up 50 cents at $83.25 a barrel by 11:06 a.m. EDT (1506 GMT). U.S. West Texas Intermediate crude (WTI) gained 62 cents to $79.25.

The number of Americans filing new claims for unemployment benefits fell last week by 10,000 to a seasonally adjusted 222,000, the U.S. Labor Department said, pointing to both an underlying strength and a steadying of the labor market.

U.S. consumer prices, meanwhile, were up less than expected in April in a boost to financial market expectations for a September cut to interest rates by the Federal Reserve, which could temper dollar strength and make oil more affordable for holders of other currencies.

“(Prices are) lifted by investors raising bets on the U.S. Federal Reserve cutting rates this year after the country reported a dip in consumer inflation in April,” Vandana Hari, founder of oil market analysis provider Vanda Insights said.

Brent had touched an intra-day low of $81.05 on Wednesday – the lowest the front-month futures contract has traded since Feb. 26 – but recovered to about 0.5% higher on the day on mixed U.S. oil inventory data that has limited oil prices.

U.S. crude oil, gasoline and distillate inventories fell, reflecting a rise in both refining activity and fuel demand, Energy Information Administration (EIA) data showed.

Crude inventories dropped by 2.5 million barrels to 457 million barrels in the week ended May 10, the EIA said, versus the 543,000 barrel consensus analyst forecast in a Reuters poll.

Gasoline demand, however, continued to land under 9 million barrels a day for a sixth straight week, below what is typical heading into the summer driving season.

“This increase in the runs that will likely persist into early next month will be going head to head with continued weak product demand that is showing no sign of improvement,” said Jim Ritterbusch of Ritterbusch and Associates.

In the Middle East, Israel’s tanks pushed into the heart of Jabalia in northern Gaza on Thursday while, in the south, its forces pounded Rafah without advancing, Palestinian residents and militants said.

Ceasefire talks mediated by Qatar and Egypt are at a stalemate, with Hamas demanding an end to attacks and Israel refusing until the group is annihilated.

(Additional reporting by Noah Browning, Katya Golubkova in Tokyo and Emily Chow in SingaporeEditing by David Goodman and Franklin Paul)