Oil pulls back from seven-week high as investors reassess Fed rate cut expectations

Brent futures were down 25 cents, or 0.36%, at $69.06 a barrel by 12:24 p.m. EDT (1624 GMT). U.S. West Texas Intermediate futures lost 33 cents, or 0.51%, to $64.66.

Both benchmarks gained 2.5% on Wednesday to reach their highest since August 1, driven by a surprise drop in U.S. weekly crude inventories and concerns that Ukraine’s attacks on Russia’s energy infrastructure could disrupt supplies.

U.S. gross domestic product increased at an upwardly revised 3.8% annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said in its latest estimate on Thursday.

“The initial reaction on that was a sell-off,” said Phil Flynn, a senior analyst at Price Futures Group.

Stronger than expected economic data would make the Federal Reserve more cautious about cutting interest rates.

The U.S. central bank cut rates by 25 bps last week, its first cut since December, and had signaled more reductions ahead.

“We have a generally risk-off market,” said Giovanni Staunovo, commodity analyst at UBS. Two consecutive down days for U.S. equities are putting pressure on oil prices, he added.

“The return of Kurdish supplies adds back fears of an oversupply narrative, propelling a pullback in prices that hover near a seven-week high,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Oil flows from Iraqi Kurdistan were expected to resume in days after eight oil companies struck a deal on Wednesday with Iraq’s federal and Kurdish regional governments.

However, oil received some support after Russian Deputy Prime Minister Alexander Novak said on Thursday the country would introduce a partial ban on diesel exports until the end of the year and extend an existing ban on gasoline exports, following a spate of Ukrainian drone attacks on Russian refineries.