Oil prices weakened overnight on worries about the global economy and as equity markets were on edge over the uncertain outlook for US interest rate cuts.
Traders are awaiting a speech from Federal Reserve Chair Jerome Powell on Friday in Jackson Hole, Wyoming, that could indicate whether the US central bank will continue to cut interest rates.
Brent crude settled down 38 US cents, or 0.6 per cent, at $US59.92 a barrel while US West Texas Intermediate crude ended the session 33 US cents, or 0.6 per cent, lower at $US55.35.
“The market will be shifting focus today to broader based macro headlines with comments out of Jackson Hole likely to be prioritised in this regard,” said Jim Ritterbusch, president of Ritterbusch and Associates.
“While we are not expecting any dramatic developments capable of swinging the equities either way by more than 1.0 per cent or so, we feel that current bullish momentum in the oil market could allow the energy complex to absorb bearish guidance much easier than any negative Jackson Hole guidance that may be forthcoming.”
US stocks turned lower on Thursday after the first contraction in the manufacturing sector in nearly a decade and comments from two Fed officials dampened hopes of future interest rate cuts.
The Jackson Hole speech is important for oil as signals from the Fed on monetary easing affect the US. dollar, which fell on Thursday against a basket of currencies.
A weaker US currency tends to support oil prices.
Concerns over the impact of US-China trade tensions on the longest US economic expansion on record prompted the Fed to cut interest rates last month for the first time since 2008.
The prolonged trade spat has sparked worries about growth in oil demand.
Forecasters such as the International Energy Agency have been lowering forecasts for world oil demand.
US President Donald Trump said on Wednesday he was “the chosen one” to address trade imbalances with China, even as congressional researchers warned his tariffs would reduce US economic output by 0.3 per cent in 2020.
Still, the price of Brent is up by about 13 per cent this year, supported by supply cuts led by the Organisation of the Petroleum Exporting Countries and export cuts affecting Iran and Venezuela which are under US sanctions.
Iran’s government said on Wednesday if its oil exports are cut to zero, international waterways would not have the same security as before, cautioning the US against raising pressure on the country.
Oil prices were also supported as inventories at Cushing, Oklahoma, the delivery point for US crude futures, fell by about 1.5 million barrels between Friday and Tuesday, traders said, citing data from market intelligence firm Genscape.
Stockpiles at the storage hub have fallen for seven straight weeks, according to government data.