Forexpros – Crude oil futures moved lower in cautious trade during European morning hours on Thursday, as market sentiment slightly weakened ahead of the European Central Bank’s policy-setting meeting later in the day.
Market players were also awaiting the release of weekly supply data from the U.S., as well as key economic data later in the day.
On the New York Mercantile Exchange, light sweet crude futures for delivery in August traded at USD86.88 a barrel during European morning trade, dropping 0.9%.
It earlier fell by as much as 1.15% to trade at a session low of USD86.72 a barrel. Prices hit a five-week high of USD88.01 a barrel on July 3.
U.S. markets reopen Thursday after being closed Wednesday for the Independence Day holiday.
The ECB was widely expected to announce an interest rate cut to 0.75% from the current record low 1.00% to help bolster growth in the region, following a recent string of weak economic data.
The ECB rate announcement was to be followed by a press conference with central bank head Mario Draghi to outline the reasons for the monetary policy decision and discuss the economic outlook for the euro area.
Also Thursday, Spain was to hold an auction of three- and 10-year government bonds, amid concerns over rising borrowing costs.
Meanwhile, the Bank of England was also set to update markets on its policy later in the day, amid hopes the central bank could increase the size of its government bond-buying program.
Market players were also eyeing Friday’s U.S. nonfarm payrolls report, amid speculation that the Federal Reserve could implement a third round of quantitative easing to shore up the economy, which has been hit by the ongoing crisis in the euro zone.
On Thursday, payroll processing firm ADP publishes its report on non-farm employment change, followed by government data on unemployment claims.
Oil traders have been paying close attention to readings on U.S. employment levels because they offer insight into the economic health of the world’s largest crude oil consumer.
Oil traders were also looking ahead to the U.S. Energy Information Administration’s closely-watched weekly report on U.S. stockpiles of crude and refined products later Thursday, a day later than usual due to the Fourth of July holiday.
The report was expected to show that U.S. crude oil stockpiles fell by 2.2 million barrels last week.
After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories dropped by 3.0 million barrels last week, compared to expectations for a decline of 1.9 million barrels.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Prices remained supported amid renewed concerns over a flare up in tensions between Iran and the West.
Iran’s National Security and Foreign Policy Committee drafted a bill earlier in the week, proposing to block the Strait of Hormuz for oil tankers in response to a European Union oil embargo on imports from Iran, which started on July 1.
The Strait of Hormuz, located between Iran and Oman, is one of the most important oil-shipping channels in the world, handling about 33% of all ocean-borne traded oil, according to the U.S. Energy Information Administration.
U.S. oil prices hit a high of USD110.53 on March 1, at a time when tensions over Iran’s nuclear program were running high.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery shed 0.25% to trade at 99.52 a barrel, with the spread between the Brent and crude contracts standing at USD12.64.
London-traded Brent prices rallied to a three-week high of USD101.56 a barrel on July 3.
Brent prices have been well-supported in recent sessions amid concerns over a disruption to supplies from Norway, the world’s eighth largest oil exporter.
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