US prices are rising as inventories shrink

Oil prices edged higher Thursday, extending recent gains on signs of cooling U.S. inflation as well as a fall in U.S. inventories.

At 09:10 ET (13:10 GMT), Brent Oil Futures rose 0.3% to $85.37 a barrel, while West Texas Intermediate crude futures rose 0.4% to $82.42 a barrel.

US CPI slowed in June

Data released earlier Thursday showed that U.S. inflation slowed to 3.0% in June on an annual basis, while the monthly figure actually fell 0.1%.

These figures pointing to a cooling of pricing pressures, adding to the expectation that the Federal Reserve might start a rate-cutting cycle in September.

Federal Reserve Chair Jerome Powell, in speaking to Congress earlier this week, flagged that the U.S. economy was still headed for a soft landing.

Powell also said that the Fed did not need to wait for inflation to fall below its 2% target to begin trimming rates. His comments dented the dollar, which helped the crude market by making oil cheaper for international buyers.

US crude inventories fall

The market had also received support from data released Wednesday showing U.S. oil inventories unexpectedly shrank in the week to July 5, amid increased demand due to summer holiday travel.

But doubts persisted over just how strong U.S. demand was, especially as distillates inventories unexpectedly grew during the week.

Still, traders were positioning for tighter U.S. markets in the coming weeks, with summer travel set to continue, while hurricane Beryl was also seen causing some disruptions in oil production in the Gulf of Mexico.