Oil edges down as rate-cut anticipation balances demand fears

NEW YORK (Bloomberg) - Oil ended lower as weak U.S. factory data highlighted demand concerns, and prospects of a Federal Reserve interest rate cut.

Futures fell 0.6% on Thursday after a choppy session. Investors are balancing fears about slowing global economies and demand with anticipation the Federal Reserve Chair Jerome Powell will signal a rate cut is coming during a speech Friday at a Wyoming conference.

“The market has been shifting to focus on global demand from U.S. trade policy,” said Judith Dwarkin, chief economist at Calgary-based consultant RS Energy.

Oil has fallen 17% since touching a high for the year in late April. Worldwide demand for petroleum-derived fuels to power trucks, trains, airplanes and ships has been imperiled by a protracted trade war between the U.S. and China. Efforts by Saudi Arabia and its producer allies to boost prices by restraining supplies haven’t borne fruit in the face of surging output from American shale fields.

A key gauge of industrial activity in the world’s largest economy declined for the first time in almost a decade. Meanwhile, a U.S. Federal Reserve bank president threw cold water on expectations of an imminent interest-rate cut.

“The more forward-looking components of the economic data fell more sharply into contraction, further reviving the recession fears that have concerned the market the past few weeks,” said Daniel Ghali, a commodity strategist at TD Securities in Toronto.

West Texas Intermediate crude for October delivery settled down $0.33 to $55.35/bbl on the New York Mercantile Exchange.

Brent for October settled down $0.38 to $59.92 on the ICE Futures Europe Exchange. The global benchmark traded at a premium of $4.57.

The drop in U.S. crude inventories last week was overshadowed by a 2.61 MMbbl increase in stored supplies of diesel and other distillates, heightening demand concerns.