LONDON: Oil pared losses on Thursday, still heading for a fourth consecutive daily decline, as cooler than expected U.S inflation figures balanced demand concerns prompted by renewed COVID curbs in China.

Crude rallied briefly, rising by more than $1 a barrel after the inflation data supported investor hopes that increases to interest rates would be tempered, which would be a positive for oil demand.

“Inflation has finally started to drop like a rock in the US and this is the best news that anyone can expect,” said Avatrade analyst Naeem Aslam.

Brent crude was down 3 cents at $92.62 a barrel at 1500 GMT, paring earlier losses.US West Texas Intermediate (WTI) crude fell 15 cents, or 0.2%, to $85.68.

“Chinese COVID-related demand woes, the reinvigorated dollar and a loose fourth-quarter oil balance could push prices further south,” said Tamas Varga of oil broker PVM.

The downside could be limited, with the European Union ban on Russian oil and G7 price cap looming, he added.

China is battling a rebound in infections in several economically vital cities, including Beijing. In the manufacturing hub of Guangzhou, millions of residents were told to get tested for COVID-19 on Wednesday.

Crude surged earlier this year as Russia’s invasion of Ukraine raised concern about supply, with Brent coming close to its record high of $147. Prices have since fallen on concern over possible recession and Brent has dropped more than 6% this week.

The market came under pressure on Wednesday from a big rise in US crude inventories. They rose by 3.9 million barrels, taking inventories to their highest since July 2021.