By Nicole Jao
NEW YORK (Reuters) -Oil prices edged lower on Friday as investors weighed weaker consumer sentiment against data that supported a U.S. Federal Reserve rate cut in September.
Brent crude futures were down 6 cents to $85.34 a barrel at 2:01 p.m. EDT (1801 GMT). U.S. West Texas Intermediate crude futures fell 6 cents at $82.62 a barrel.
Brent futures were set to post a weekly loss exceeding 1%after four weeks of gains. WTI futures were on track for a 0.7% weekly decline.
A monthly survey by the University of Michigan showed U.S. consumer sentiment fell to eight-month low in July, although inflation expectations improved for the next year and beyond.
The U.S. Labor Department said the producer price index (PPI) rose 0.2% in June, slightly more than expected, as the cost of services climbed. Still, investors expect the Fed could start cutting rates in September.
“The market isn’t afraid of the Fed at this point,” said Phil Flynn, an analyst at Price Futures Group.
Lower rates are expected to boost economic growth, which could boost fuel consumption.
“Cooling U.S. inflation numbers may support the case for the Fed to kick-start its policy easing process earlier rather than later,” said Yeap Jun Rong, market strategist at IG.
“It also adds to the series of downside surprises in U.S. economic data, which points to a clear weakening of the U.S. economy,” he added.
Oil prices have drawn some support from U.S. gasoline demand, which government data showed on Wednesday was at 9.4 million barrels per day (bpd) in the week ended July 5, the highest since 2019 for the week that includes the Independence Day holiday. Jet fuel demand on a four-week average basis was at its strongest since January 2020.
The strong fuel demand encouraged U.S. refiners to ramp up activity and draw from crude oil stockpiles. U.S. Gulf Coast refiners’ net input of crude rose last week to more than 9.4 million bpd for the first time since January 2019, government data showed.
Signs of weaker demand from China, the world’s biggest oil importer, could counter the outlook from the U.S. and weigh on prices.
“The recent downside correction is evidently over, although the speed of further ascent might be hindered by falling Chinese crude oil imports, which plummeted 11% in June from the previous year,” said Tamas Varga of oil broker PVM.
U.S. active oil rig count, an early indicator of future output, fell by one to 478 this week, the lowest since December 2021, energy services firm Baker Hughes reported on Friday.
(Reporting by Nicole Jao and Shariq Khan in New York, Paul Carsten in London, Arunima Kumar in Bengaluru and Jeslyn Lerh in Singapore; Editing by Sherry Jacob-Phillips, Susan Fenton, David Evans and David Gregorio)
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