Investing.com -- Oil prices edged lower on Thursday after logging sharp gains in the prior session as markets awaited more cues on the potential lifting of the U.S. debt ceiling, with a slew of economic and monetary policy indicators lined up for later in the week.
Crude prices rallied over 3% on Wednesday after the Biden administration said that a deal on raising the U.S. debt limit could be reached as soon as this week, avoiding the possibility of a default.
The move buoyed market sentiment and helped oil prices recover from steep losses over the past four weeks. A measure of bargain buying also supported oil prices, as U.S. crude hit a support level of $70 a barrel.
But concerns over rising U.S. crude supplies and weakening global demand sapped the oil recovery of any momentum, with prices trending lower on Thursday.
Brent oil futures fell 0.2% to $76.65 a barrel, while West Texas Intermediate crude futures fell 0.4% to $72.56 a barrel by 21:18 ET (01:18 GMT).
Data on Wednesday showed that U.S. crude stockpiles unexpectedly surged in the week to May 12. This, coupled with data from the Energy Information Administration that U.S. drilling activity was likely more than expected through 2022, pointed to bloated supplies in the world’s largest oil consumer.
Still, a drop in gasoline inventories pointed to some improvement in demand as the travel-heavy summer season approaches.
Focus is now on more U.S. manufacturing and labor data, due later in the day, to gauge the health of the U.S. economy. Softer-than-expected economic readings this week ratcheted up concerns that economic growth was cooling this year, which could stymie oil demand.
Signals on monetary policy from a slew of Federal Reserve officials are also due in the remainder of the week, with Chair Jerome Powell set to speak on Friday. Several Fed officials offered a hawkish outlook on monetary policy this week, indicating that stubborn inflation could invite more interest rate hikes.
This boosted the dollar, pushing it to a near seven-week high, which in turn weighed on oil markets.
Concerns over slowing demand also persisted, as weaker-than-expected economic readings from China continued to pour in, suggesting that a post-COVID rebound in the world’s largest oil importer was running out of fuel.
This cast doubts over forecasts that China will drive oil demand to record highs this year.