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Brent futures for July delivery were down 44 cents, or 0.5%, at
$81.42 a barrel by 1026 GMT while the more liquid August futures
were up 8 cents at $81.96.
The spread between the two contracts hit an 11-month low,
entering contango for the first time this year.
U.S. West Texas Intermediate (WTI) crude was down 3 cents at
$77.88.
Brent is on course for a monthly loss of about 7% after dropping
in the previous session on a surprise build in U.S. fuel
inventories.
Higher refinery utilization brought a deeper than expected draw
in crude oil stocks in the week to May 24, Energy Information
Administration (EIA) data showed.
However, gasoline inventories rose by 2 million barrels, against
expectations of a 400,000 barrel draw and higher demand ahead of
the Memorial Day weekend.
"U.S. summer travel season kicked off with Memorial Day weekend,
with initial indications showing strong driving and flying
activity — but fuel use looks more muted, implying efficiency
gains," Citi analysts wrote in a note.
In the euro zone, inflation rose by 2.6% in May, Eurostat data
showed, beating the 2.5% expected by economists polled by
Reuters.
The increase is unlikely to deter the European Central Bank from
cutting borrowing costs next week, but it could slow the
rate-cutting cycle in the coming months.
The oil market has been under pressure in recent weeks over the
prospect of borrowing costs staying higher for longer, which
ties down funds and can curb oil demand.
U.S. inflation data is due to be released at 1230 GMT.
Markets are also awaiting the OPEC+ meeting on Sunday, with the
producer group working on a complex deal that would allow it to
extend some of its deep oil production cuts into 2025, said
three sources familiar with OPEC+ discussions.
"The probable extension of the voluntary production cuts by
OPEC+ should cause oil prices to rise again," Commerzbank
analysts said. "Ultimately, this would threaten a significant
undersupply on the oil market in the third quarter."
(Reporting by Robert Harvey in London, Deep Vakil in Bengaluru,
Georgina McCartney in Houston and Colleen Howe in BeijingEditing
by David Goodman)
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