By Ahmad Ghaddar

LONDON (Reuters) -Oil prices rose on Friday, on track to end higher this week after two straight weeks of losses, after a top U.S. official expressed optimism over economic growth and as supply concerns lingered due to conflicts in the Middle East.

futures gained 19 cents, or 0.2%, to $89.20 a barrel at 0927 GMT, and U.S. West Texas Intermediate crude futures rose by 25 cents, or 0.3%, to $83.82 a barrel.

Brent has gained 2.2% so far this week, while WTI is up 0.8%.

U.S. Treasury Secretary Janet Yellen told Reuters on Thursday that U.S. GDP growth for the first quarter could be revised higher, and inflation will ease after a clutch of “peculiar” factors held the economy to its weakest showing in nearly two years.

U.S. economic growth was likely stronger than suggested by weaker-than-expected quarterly data, she said.

Data showed that economic growth slowed in the first quarter, and prior to Yellen’s comments, tremors from an acceleration in inflation had weighed on oil prices as investors calculated that the Federal Reserve would not cut interest rates before September.

The personal consumption expenditures (PCE) price index excluding food and energy rising rose at a 3.7% annual rate after a 2.0% pace in the fourth quarter of 2023, the data showed.

“US GDP growth of 1.6% that … came in under expectations might also be deemed a welcome development confirming the effectiveness of the recent monetary tightening, nonetheless it was the PCE price index that drove sentiment,” PVM Oil analyst Tamas Varga said.

Elsewhere, supply concerns as tensions continue in the Middle East also buoyed prices early in the session.

Israel stepped up air strikes on Rafah after saying it would evacuate civilians from the southern Gazan city and launch an all-out assault despite allies’ warnings this could cause mass casualties.

Investing.com– Gold prices fell in Asian trade on Thursday and were close to breaking below key levels as waning safe haven demand and the prospect of higher-for-longer U.S. interest rates battered the yellow metal.

Bullion prices were nursing a sharp drop from record highs over the past week, as a potential conflict between Iran and Israel did not escalate as markets were fearing. This largely dented safe haven demand for the yellow metal.

Waning safe haven demand left gold vulnerable to headwinds from U.S. rates, given that higher-for-longer rates push up the opportunity cost of investing in bullion.

fell 0.1% to $2,313.62 an ounce, while expiring in June fell 0.6% to $2,325.05 an ounce by 00:26 ET (04:26 GMT). 

Strength in the – which remained close to recent five-month peaks, also pressured metal prices.

Gold eyes $2,300 support, more rate cues awaited 

Spot prices were now close to breaking below the $2,300 an ounce support level, which could herald more near-term losses for the yellow metal.

But gold’s next leg of movement is expected to be driven largely by more upcoming cues on the U.S. economy and interest rates.

First-quarter U.S. data due later on Thursday is expected to show whether the world’s largest economy remained resilient in the beginning of 2024. 

data- which is the Federal Reserve’s preferred inflation gauge- is likely to have a bigger impact on gold, given that it ties directly into the central bank’s outlook on interest rates.

Hotter-than-expected U.S. inflation readings and hawkish Fed signals saw traders largely price out expectations for a June rate cut- a scenario that presents more near-term pressure for gold prices.

Other precious metals also retreated on Thursday after tumbling from recent peaks over the past week. fell 0.3% to $910.30 an ounce, while fell 1% to $27.078 an ounce.

Copper prices cool further from 2-year highs

Among industrial metals, copper prices fell further from recent two-year highs as weak economic readings and fears of high interest rates somewhat offset optimism over tighter markets. 

on the London Metal Exchange fell 0.2%  to $9,773.0 a ton, while fell 0.1% to $4.4510 a pound. Both contracts were below two-year highs hit earlier in April, after stricter western sanctions on Russian metal exports pointed to tighter markets. 

But this optimism was dulled by top copper producer Chile signaling that state-owned copper miner Coldeco will increase output in 2024.

Concerns over steady demand also weighed after U.S. purchasing managers index data read weaker than expected for April, with the back in contraction territory. 

By Alex Lawler and Deep Kaushik Vakil

LONDON (Reuters) -Oil steadied on Thursday after settling lower the previous day as signs of retreating fuel demand in the U.S., the world’s biggest oil user, contended with widening conflict risks in the Middle East.

This week’s supply report from the U.S. Energy Information Administration (EIA) on Wednesday showed gasoline stockpiles fell less than forecast while distillate stockpiles rose against expectations of a decline, reflecting signs of slowing demand. [EIA/S]

“It does not exactly give a healthy state of domestic demand in the U.S.,” said John Evans of oil broker PVM, who added that U.S. economic data out later in the day would be important for sentiment. “Oil prices today will not be in the hands of the oil market,” he said.

futures rose 18 cents, or 0.2%, to $88.20 a barrel by 1135 GMT while U.S. West Texas Intermediate crude futures were up 17 cents, or 0.2%, at $82.98.

inventories unexpectedly fell sharply last week, the EIA report also showed, as exports jumped.

The concern about U.S. fuel demand arises amid signs of cooling U.S. business activity in April and as stronger-than-expected inflation and employment data means the Federal Reserve is seen as more likely to delay expected interest rate cuts.

U.S. economic data out later on Thursday includes first-quarter economic growth. Gross domestic product (GDP) likely increased at a 2.4% annualised rate, according to a Reuters survey of economists.

“The current weakness in benchmark prices, after testing above $90 levels, is due to market sentiment refocusing on global economic headwinds over geopolitical tensions,” said Emril Jamil, senior oil analyst at LSEG Oil Research.

Fighting in the Gaza Strip between Israel and Hamas is expected to expand as Israel may start an assault on Rafah, in the enclave’s south, which may increase the risk of a wider war that could potentially disrupt oil supplies.

Still, oil supply has not been affected as yet and there have been no other signs of direct conflict between Israel and Hamas-backer Iran, a major oil producer, since last week.