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NEW DELHI: Oil prices stalled on Friday over a forecast of slowing demand by the International Energy Agency after gaining in the previous session on weak U.S. retail sales data that sparked optimism that the Fed might cut interest rates sooner than expected.
Brent crude futures were down 9 cents, or 0.1%, to $82.77 a barrel at 0342 GMT. U.S. West Texas Intermediate crude futures rose 4 cent to $78.07 a barrel.
Both contracts climbed over 1% on Thursday as a larger-than-expected drop in U.S. retail sales prompted hopes the Federal Reserve will soon start cutting interest rates, which could be positive for oil demand.
The U.S. Commerce Department report showed retail sales dropped 0.8% in January, the biggest fall since February 2023. Economists polled by Reuters had forecast retail sales dipping 0.1%.
"Hopes for U.S. rate cuts provided support on Thursday, but investors are now adjusting their positions ahead of a long weekend in the U.S.," said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, noting Feb. 19 is a U.S. holiday.
"While keeping a close eye on interest rate trends, investors will continue to assess whether geopolitical risks in the Middle East will spill over into crude supply chains," he said, predicting WTI to trade in the $70-$80 range for a while.
Weighing on market sentiment, Paris-based International Energy Agency (IEA), the industrialised world's energy watchdog, said on Thursday that global oil demand growth was losing momentum and trimmed its 2024 growth forecast, in sharp contrast to the view held by the Organization of the Petroleum Exporting Countries (OPEC).
The IEA's monthly report said it expects global oil demand to grow by 1.22 million barrels per day (bpd) this year, slightly down from last month's estimate. OPEC on Tuesday stuck to its much steeper growth forecast of 2.25 million bpd.
In the Middle East, Hezbollah said on Thursday it fired dozens of rockets at a northern Israeli town in a "preliminary response" to the killing of 10 civilians in southern Lebanon, the deadliest day for Lebanese civilians in four months of cross-border hostilities.
Meanwhile, Israeli forces said on Thursday they had raided the biggest functioning hospital in Gaza as footage showed chaos, shouting and gunfire in dark corridors filled with dust and smoke.
Analysts said the risk of a wider Middle East conflict could continue to guide crude prices.
"I would expect the latest gains from an increased Mideast risk premium to stick, especially going into the weekend," said Vandana Hari, founder of oil markets analysis provider Vanda Insights.
"The impending Israeli offensive in Rafah has the potential to unleash a response from the Houthis, which have been a bit quiet of late in the Red Sea, and other Iran-backed militia in the region," Hari added. (Reporting by Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; Editing by Muralikumar Anantharaman and Miral Fahmy)