OIL prices slipped more than US$1 on Wednesday as US commercial inventories rose, while weaker economic data from China and dimmed prospects of interest rate cuts stoked worries about global demand.

Brent futures for June were down US$1.01, or 1.32, to US$89.01 a barrel at 11.19 am EST (1619 GMT), while US crude futures for May were down 88 cents, or 1 per cent, at US$84.48 a barrel. Both were on track for their biggest fall since March 20.

Oil prices have softened this week as economic headwinds curb gains from geopolitical tensions, with markets eyeing how Israel might respond to Iran’s weekend attack.

Analysts do not expect Iran’s unprecedented missile and drone strike on Israel to prompt dramatic US sanctions on Iran’s oil exports.

“Oil prices go about their business of unwinding some of the war premium that has been priced in,” said John Evans at oil broker PVM, adding that they also faced “a setback in interest rate cut hopes.”

Crude inventories rose by 2.7 million barrels to 460 million barrels in the week ending April 12, the EIA said, nearly double analysts’ expectations in a Reuters poll for a 1.4 million-barrel build.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

“The direction of the market is still going to be dictated by events in the Middle East and the ramifications of whatever retaliation Israel takes on Iran,” said Andrew Lipow, president of Lipow Oil Associates in Houston.

Top Federal Reserve officials including Chair Jerome Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, dashing investors’ hopes for meaningful reductions in borrowing costs this year.

Britain’s inflation rate slowed by less than expected in March, signaling that a first rate cut by the Bank of England could also be further off than previously thought.

However, inflation slowed across the euro zone last month, reinforcing expectations for a European Central Bank rate cut in June.

In China, the world’s biggest oil importer, the economy grew faster than expected in the first quarter, but several other indicators showed that demand at home remains frail.

Elsewhere, Tengizchevroil announced plans for scheduled maintenance at one of six production trains at the Tengiz oilfield in Kazakhstan in May. REUTERS