NEW YORK: Oil prices weakened on Thursday as worries about the global economy weighed and equity markets were under pressure as uncertainty over the outlook for US interest rate cuts left investors on edge.
Traders are awaiting a speech from Federal Reserve Chair Jerome Powell on Friday in Jackson Hole, Wyoming, that could indicate whether the US central bank will continue to cut interest rates.
Brent crude fell 47 cents, or 0.8pc, to $59.83 a barrel by 12:34 p.m. ET (1634 GMT), while US West Texas Intermediate crude fell 44 cents, or 0.8pc, to $55.24.
"The market will be shifting focus today to broader based macro headlines with comments out of Jackson Hole likely to be prioritized in this regard", said Jim Ritterbusch, president of Ritterbusch and Associates.
"While we are not expecting any dramatic developments capable of swinging the equities either way by more than 1pc or so, we feel that current bullish momentum in the oil market could allow the energy complex to absorb bearish guidance much easier than any negative Jackson Hole guidance that may be forthcoming."
US stocks turned lower on Thursday as the first contraction in the manufacturing sector in nearly a decade and after Philadelphia Federal Reserve Bank President Patrick Harker said on Thursday that he does not see the case for additional stimulus.
The Jackson Hole speech is important for oil as signals from the Fed on monetary easing affect the US dollar. A weaker US currency tends to support oil prices, and the dollar eased on Thursday against a basket of currencies.
Concerns over the impact of the trade tensions between Washington and Beijing on the US economic expansion, the longest on record, prompted the Fed to cut interest rates last month for the first time since 2008. The prolonged trade spat has sparked worries about growth in oil demand.
Forecasters such as the International Energy Agency have been lowering forecasts for world oil demand.
US President Donald Trump on Wednesday said he was "the chosen one" to address trade imbalances with China, even as congressional researchers warned his tariffs would reduce US economic output by 0.3pc in 2020.
Still, the price of Brent is up by about 13pc this year, supported by supply cuts led by the Organization of the Petroleum Exporting Countries, and export cuts affecting Iran and Venezuela which are under US sanctions.
Iran said on Wednesday if its oil exports are cut to zero, international waterways would not have the same security as before, cautioning Washington against raising pressure on Tehran.
Also lending some support to prices, inventories at Cushing, Oklahoma, the delivery point for US crude futures fell by about 1.5 million barrels between Friday and Tuesday, traders said, citing data from market intelligence firm Genscape.
Stockpiles at the storage hub have fallen for seven straight weeks, according to government data.