Oil prices edged higher on Thursday, partially recovering from the previous day’s losses, driven by optimism that potential U.S. interest rate cuts could spur economic activity and fuel demand. However, concerns about slower global demand limited the gains.

Brent crude futures rose by 17 cents, or 0.2%, to $79.93 a barrel as of 0029 GMT, while U.S. West Texas Intermediate (WTI) crude increased by 23 cents, or 0.3%, to $77.21 per barrel.

Both benchmarks had dropped by over 1% on Wednesday, following an unexpected rise in U.S. crude inventories and easing fears of an escalating conflict in the Middle East.

In July, U.S. consumer prices saw a moderate increase, with the annual inflation rate falling below 3% for the first time in nearly three and a half years. This has strengthened expectations that the Federal Reserve might reduce interest rates next month.

"We observed a correction in Asia's trading session as the oil market was oversold on Wednesday," noted Yuki Takashima, an economist at Nomura Securities, who also mentioned that investors are anticipating the Fed could begin cutting rates next month.

"Nevertheless, oil prices are likely to remain under pressure due to ongoing concerns about sluggish global demand, particularly in China," Takashima added, forecasting that WTI could approach the $72 mark in early August.

U.S. crude oil inventories increased by 1.4 million barrels in the week ending August 9, contrary to expectations of a 2.2 million barrel drawdown, marking the first build since late June, according to data from the Energy Information Administration (EIA) released on Wednesday.

Earlier this week, the International Energy Agency (IEA) reduced its oil demand growth forecast for 2025, citing the impact of a weakening Chinese economy. This followed a similar downward revision in demand expectations for 2024 by OPEC.

Globally, jet fuel demand is also expected to decline as reduced consumer spending affects travel budgets, a trend that could weigh on oil prices in the coming months.

Despite demand concerns, oil prices received some support from investor unease over Iran's potential response to the assassination of a Palestinian Islamist group Hamas leader last month. Three senior Iranian officials indicated that only a ceasefire agreement in Gaza could prevent Iran from directly retaliating against Israel for the assassination.

On Wednesday, Hamas announced that it would not participate in a new round of Gaza ceasefire talks scheduled for Thursday in Qatar, diminishing hopes for a negotiated truce.

Paraphrasing text from "Reuters" all rights reserved by the original author.