By Arathy Somasekhar
HOUSTON (Reuters) -Crude oil prices fell 1% on Tuesday as weak U.S. consumer confidence data fed worries about the economic outlook and fuel demand after a slow start to the U.S. summer driving season.
futures for August settled down $1, or 1.2%, at $85.01 a barrel. futures settled at $80.83, down 80 cents or 1%.
Last week, both benchmarks gained about 3%, marking two straight weeks of gains, and taking them to their highest since April.
U.S. consumer confidence decreased in June. While households remained upbeat about the labor market and expected inflation to moderate, concerns about the economy could dent gasoline demand.
High inventory levels have made oil traders nervous about summer driving demand.
U.S. crude stocks were up by 914,000 barrels in the week ended June 21, according to market sources citing American Petroleum Institute figures that also showed gasoline inventories rose by 3.843 million barrels and distillates fell by 1.178 million barrels. Official government data is due Wednesday.
U.S. crude and gasoline stockpiles were expected to have fallen while distillate inventories likely rose last week, a preliminary Reuters poll showed on Monday.
Investors are also trying to discern the timing of Federal Reserve interest rate cuts. Fed Governor Lisa Cook said on Tuesday a rate cut is likely if the economy performs as expected, but declined to say when the U.S. central bank will act.
A Fed “decision on interest rates is still mixed, and most of the crude market has priced in a quarter percent cut by September,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Oil drew support from supply disruption linked to Ukrainian attacks on Russian oil infrastructure. On June 21, Ukrainian drones hit four refineries, including the Ilsky refinery, one of the main fuel producers in southern Russia.
Worries of escalating tensions between Israel and the Iran-backed group Hezbollah have also underpinned oil prices, analysts said.
Israeli forces killed at least 24 Palestinians in three separate airstrikes on Gaza City early on Tuesday, Gaza health officials and medics said.
More than eight months into the war, international mediation backed by the U.S. has failed to yield a ceasefire agreement.
“Geopolitical pressures continue to roil the oil market from multiple fronts. … (The) tensions are expected to persist amid failed efforts to broker ceasefires,” said Claudio Galimberti, a director at consultancy Rystad Energy.