By Arathy Somasekhar
HOUSTON (Reuters) -Oil prices were steady on Thursday as concerns about fuel demand after slower-than-expected U.S. economic growth were offset by worries about supply disruptions as Israel stepped up airstrikes on Rafah in Gaza.
Futures rose 20 cents, or 0.2%, to $88.22 a barrel at 1:30 PM ET (1730 GMT), while U.S. West Texas Intermediate crude futures were flat at $82.81.
U.S. economic growth slowed more than expected in the first quarter, but an acceleration in inflation indicated the Federal Reserve would not cut rates before September.
US gasoline inventories fell less than forecast and distillate inventories rose against expectations of a decline in the week to April 19, according to [EIA/S] Energy Information Administration (EIA) data on Wednesday reflects signs of slowing demand.
Inventories fell unexpectedly sharply last week, the EIA report also showed, while exports rose.
“While we thought last week’s Department of Energy inventory data was generally bullish, there are some concerns about apparent demand,” said Tim Evans, an independent energy analyst.
Concerns about U.S. fuel demand come amid signs of a slowdown in U.S. business activity in April and as stronger-than-expected inflation and employment data mean the Fed is more likely to delay expected rate cuts.
“The current weakness in benchmark prices, after testing above the $90 level, is due to market sentiment refocusing on global economic headwinds rather than geopolitical tensions,” said Emril Jamil, senior oil analyst at LSEG Oil Research .
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Fighting in the Gaza Strip between Israel and Hamas is expected to expand as Israel could launch an attack on Rafah, in the south of the enclave, raising the risk of a broader war that could potentially disrupt oil supplies.
Yet oil supplies have not been affected so far and there have been no other signs of direct conflict between Israel and Hamas backer Iran, a major oil producer, since last week.
Traders remain unsure about how much geopolitical risk to price in after Israel and Iran pulled back from further direct confrontations last week, Evans said, warning that residual risk remains as Israel resumes operations against Hezbollah in southern Lebanon and Hamas steps up in Gaza.
