Oil dips as demand worries outweigh Middle East supply risks

OIL prices slipped for the third straight session on Wednesday as likely higher U.S. commercial inventories weighed, while weaker economic data from China and dimmed prospects of interest rate cuts stoked worries about global demand.

Brent futures for June were down 21 cents, or 0.2%, to $89.81 a barrel at 0915 GMT, while U.S. crude futures for May were down 19 cents, or 0.2%, to $85.17 a barrel.

Oil prices have softened so far this week as economic headwinds curb gains from geopolitical tensions, with markets eyeing how Israel might respond to Iran's weekend attack.

Analysts do not expect Iran's unprecedented missile and drone strike on Israel to prompt dramatic sanctions on Iran's oil exports from the United States.

"Oil prices go about their business of unwinding some of the war premium that has been priced-in," said John Evans at oil broker PVM, adding that they also faced "a setback in interest rate cut hopes".

Top U.S. Federal Reserve officials including Chair Jerome Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, dashing investors' hopes for meaningful reductions in borrowing costs this year.

Britain's inflation rate slowed by less than expected in March, signalling that a first rate cut by the Bank of England could also be further off than previously thought.

However, inflation slowed across the euro zone last month, reinforcing expectations for a European Central Bank rate cut in June.

"A build-up in U.S. crude inventories overnight and a mixed set of economic data out of China also offered some reservations, alongside near-term overbought technicals which prompts some profit-taking," said IG market strategist Yeap Jun Rong.

In China, the world's biggest oil importer, the economy grew faster than expected in the first quarter, but several other indicators showed that demand at home remains frail.

U.S. crude inventories rose by about 1.4 million barrels last week, according to a Reuters poll. Official data from the Energy Information Administration, the statistical arm of the U.S. Department of Energy, is due on Wednesday at 10:30 a.m. (1430 GMT).

Elsewhere, Tengizchevroil announced plans for scheduled maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May. - Reuters

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