LONDON: Oil prices rose on Thursday with the Brent benchmark holding above $85 a barrel, as hopes rose for rate cuts in the United States after data showed a slowdown in inflation.

Brent futures were up 27 cents, or 0.3%, to $85.35 a barrel by 1305 GMT. Meanwhile, U.S. West Texas Intermediate (WTI) crude rose 29 cents, or 0.4%, to $82.39.

U.S. consumer prices unexpectedly fell and the annual increase was the smallest in a year, data showed on Thursday, reinforcing views that the disinflation trend was back on track, potentially drawing the Federal Reserve another step closer to cutting interest rates.

Easing interest rates could be positive for oil because cheaper credit can increase consumer demand.

Fed Chair Jerome Powell has also acknowledged the recent improving trend in price pressures, but told lawmakers this week he was not yet ready to declare inflation had been beaten and that “more good data would strengthen” the case for rate cuts.

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“The larger-than-expected slowdown in the US CPI (consumer price index) today, and especially the down tick in the core rate, have pushed oil prices even higher,” said Charalampos Pissouros, a senior investment analyst at brokerage XM.

But the future of global oil demand remains tenuous, according to some. In its latest monthly oil market report, the IEA saw global demand growth at its lowest in more than a year at 710,000 barrels per day (bpd) in the second quarter, mainly reflecting a contraction in China’s consumption.

The IEA’s global crude demand growth forecast for 2024 was kept largely unchanged at 970,000 bpd, while its 2025 forecast was cut by 50,000 bpd to 980,000 bpd.

OPEC in its monthly report on Wednesday kept its forecasts for world oil demand growth for this year and next unchanged at 2.25 million and 1.85 million bpd, respectively.

Both contracts rose on Wednesday, breaking a three-day losing streak, after a report from the Energy Information Administration (EIA) showed a drop in U.S. crude and gasoline stocks.

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