Oil Prices Settle Lower Amid Supply Surplus and Ongoing Demand Concerns

Oil prices experienced a decline on Thursday as concerns regarding supply exceeding demand continued to loom, following an unexpected increase in inventories. However, losses were mitigated by indications of easing inflation in the U.S.

As of 14:30 ET, crude oil fell by 0.2% to $78.62 per barrel, while Brent crude dropped 0.4% to $82.27 per barrel.

### Weak PPI Data Stabilizes Prices

Recent data indicated a surprising drop in U.S. producer prices for May, with the Producer Price Index (PPI) declining by 0.2%, after a 0.5% increase in April. Over the year ending in May, the PPI rose by 2.2%, slightly down from a 2.3% increase in April.

This data followed reports from Wednesday showing that consumer prices remained unchanged in May for the first time in nearly two years. The Federal Reserve maintained its benchmark overnight interest rate between 5.25% and 5.50% on Wednesday, with officials revising their expectations for interest rate cuts down from three to one this year due to persistent inflation concerns.

A potential reduction in interest rates could boost economic activity in the U.S., which may lead to increased demand for crude oil, the largest consumer of the commodity in the world.

### Growing Supply Concerns Amid Inventory Surplus

Citi analysts have issued a warning that oil prices could fall below $60 per barrel next year, citing a significant supply surplus attributed to rising production levels in North America, Brazil, and Guyana. This bearish forecast follows government data released on Wednesday, which revealed a surprise increase of 3.7 million barrels in U.S. crude oil inventories during the first week of June, far exceeding expectations for a decrease of 1.2 million barrels.

Additionally, significant rises in gasoline and distillate stockpiles have raised concerns about lagging fuel demand as the summer season progresses.